It would be “inappropriate” for the government to subsidise the local and regional press while the OFT should investigate council newspapers, a committee of MPs said today.

In its report ‘Future for local and regional media’, published by the Culture, Media and Sport Committee, MPs said that in order to maintain the local media’s independence, it should not receive taxpayers’ cash.

The report also recommends that the Office of Fair Trading conducted a review into the impact of local authority publications on local commercial newspapers.

It said that the Department for Communities and Local Government should amend its guidance for local councils which produce publications to ensure they clearly state on page one that they are published by a council.

The committee noted with concern the growing number of council newspapers, found that some were misleading about the fact that they were published by local authorities and in some instances contained political bias.

Chairman John Whittingdale MP said: “There is a real problem with local authority newspapers and magazines that needs to be addressed.

“We have seen council newspapers that are effectively posing as, and competing with, local commercial newspapers.

“While it is important that local authorities communicate with their citizens, it is unacceptable that councils can set up publications in direct competition to local newspapers and that act as a vehicle for political propaganda.”

A series of hearings were held in Westminster over recent months in which newspaper executives, industry analysts and other senior media figures discussed the future of local newspapers, regional TV and online news with the committee of MPs.

The report also welcomes the Press Association’s public service reporting project, first outlined last July, and suggests it could alleviate some of the pressure in local newspapers.

PA is running a trial scheme in Merseyside whereby reporters are employed specifically to cover local public bodies such as courts or NHS trusts in-depth.

The report also acknowledged the concerns of local press publishers about the current merger regime and concluded that the government needed to re-examine it.

Referring to local online news, the committee acknowledges the worries of press publishers about aggregation websites like Google News which provide consumers with a list of news headlines and links from numerous sources.

The committee said it did not think it was acceptable that the local newspaper industry was prevented from taking collective action on this by competition laws.

Again, it recommended that the Office of Fair Trading should re-examine the issue.

The report concluded that Google had achieved a dominant position through successful innovation and that some of the criticisms of Google from local newspaper publishers lacked focus.

It also noted that local press groups could opt out Google web searches and Google News if they wished but welcomed recent changes to Google News aimed at supporting local newspaper websites.

MPs urged Google to be aware going forward of the impact their products could have on local newspapers.

Finally, the committee considered whether it was local journalism, rather than local newspapers, that needed saving and concluded that local printed newspapers were still relevant.

This was not least because of the volume of people without internet access but MPs also said that newspaper must innovate and adapt to the digital world to survive.