The government has rejected the central recommendation from a report into the future of news provision to set up an “institute for public interest news.”

The Department for Digital, Culture, Media and Sport says the launch of such a body would amount to “inappropriate government interference with the press” in its response to last year’s review into the issue by Dame Frances Cairncross, pictured.

However, DCMS has backed a proposed expansion of the Local Democracy Reporting Service, which employs 150 journalists across regional press groups with BBC funding.

The News Media Association has welcomed the rejection of the planned institute for public interest news, but says it is “disappointed at the lack of clear financial commitment by the government” to implement other recommendations made by Dame Frances.

The idea of the institute was the central plank of last year’s review by Dame Frances, who argued that it should eventually take over the local democracy service from the BBC.

But in their formal response to the review published today, ministers said: “The government will not be taking this recommendation forward.

“The government acknowledges the value the proposed institute is intended to achieve, in bringing different initiatives together in order to amplify their impact, and acting as a channel for collaboration.

“However, the government recognises the concerns of many in the publishing industry regarding the inherent challenge an organisation with such a purpose will face in defining what qualifies as ‘public interest’ news, and what might therefore be deserving of support.

“It is not for the government to define what qualifies as ‘public interest’ news. While any institute would be at arm’s length from government, we recognise concerns that even an arm’s length relationship risks perceptions of inappropriate government interference with the press.

“Therefore, the government will not take forward this recommendation.”

The News Media Association said it welcomed the decision not to go ahead with the institute but called for a clearer financial commitments from the government to implement the rest of the Cairncross recommendations.

Chairman Henry Faure Walker said: “The news media industry welcomed the launch of the Cairncross Review and the majority of its recommendations aimed at sustaining high quality journalism.

“We are encouraged by the importance placed on this by the Government and the progress made in some areas such establishing the CMA study into the dominance of the major online platforms and the commitment by the Government to further discussions with the NMA to support news journalism – particularly at a local level.

“We welcome the decision not to progress with the establishment of an Institute for Public Interest News.

“However, one year after Cairncross reported, we are disappointed at the lack of clear financial commitment by the Government to implement the Cairncross recommendations.

“The next three years will be critical for journalism – particularly at a local and regional level – journalism that provides a huge public good to communities up and down the country.

“Without swift and significant market intervention now, the flow of independent, high quality local news and information which is essential for the functioning of our democracy can no longer be guaranteed.”

In its response, the government said DCMS was supportive of a recommendation to review and expand the LDRS, saying initial  analysis of the scheme had been “largely positive,

But it added: “Certain concerns have been raised, including feedback that the scheme largely favours large and established publishers, and questions about whether the new reporters are providing extra resources for newsrooms, or are being used to fill posts which have been made redundant due to cost cutting.”

It went on to “encourage the BBC to broaden the scope of its evaluation of the scheme” during a planned review of the service this year.

The government said: “The upcoming review will take place against the context of wider, external comment on the scheme and calls for its expansion. As such, there may be merit in it going beyond assessing whether the service is meeting the aims set by it for the BBC, to consider how it might be adjusted and expanded to meet the needs of both the news industry and of citizens.

“The BBC has announced proposals to set up a new body to take over the running of the scheme, which could harness funding from sources outside of the BBC.

“The BBC has indicated that, were it to secure further funding, it would expand the scheme, potentially recruiting greater numbers of reporters to cover local courts as well as local councils. The government is supportive of this approach and will follow developments in this area closely.”

The government also held out the prospect of budget measures to assist the news industry, in response to Dame Frances’s call for new tax reliefs aimed at encouraging payments for online news content and the provision of local and investigative journalism.

Ministers said: “The government accepts the public good of traditional print newspapers and is committed to maintaining zero-rated VAT in this area.

“We also recognise that changes in technology are shifting traditional journalism online and we are therefore considering the merits and risks associated with extending the zero rate.

“The Chancellor will consider the case for a range of potential tax incentives to support the news publishing industry this year.”