Today's Digital Britain report said it would be "against the public interest" for local papers to be rendered unviable by the flight of paid-for advertising to local authority publications.

The report revealed that ministers have now asked the Audit Commission - the local spending watchdog - to carry out an inquiry into the issue.

It will consider whether curbs should be placed on local authorities competing for advertising revenue with the local press.

"The review noted the adverse impact on local newspapers of the increasing role of local authorities in taking paid advertising to support local authority information sheets," said the report.

"Clearly, if such advertising grows to the extent that, coupled with other pressures on local commercial media it renders them unviable, that would be against the public interest.

"While local authority information sheets can serve a useful purpose for local residents and businesses, they will inevitably not be as rigorous in holding local institutions to account as independent local media."

"The government is therefore inviting the Audit Commission to undertake a specific inquiry into the prevalence of this practice and if restraints should be placed on local authority activity in this field."

The review was warmly welcomed by Trinity Mirror chief executive Sly Bailey.

She said in a statement: "Not before time the Audit Commission are to look at the travesty of local councils using tax payers money to masquerade as and compete directly with local newspapers. This must be tackled with a sense of urgency."

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