Local newspaper publishers have long complained about council newspapers, which they claim eat into an already dwindling market share.

At a Westminster Hall debate last week, MPs from the three main parties called for the publications to be culled, labelling them as nothing more than "propaganda masquerading as independent media".

One MP said: "Just imagine if a beleaguered Prime Minister was to hire a team of journalists and commentators to turn out a daily newspaper, there would be an outcry."

At the event, minister for creative industries Siôn Simon alluded that the government may ask the OFT or Ofcom to "consider the question of competition and the potential impact on the paid-for newspaper".

However, Guardian newspaper guru and columnist Roy Greenslade pointed out in his blog this weekend that the investigation was by no means guaranteed at this point, despite supporting the issue.

He made reference to the Fulham and Hammersmith Chronicle, which has had to go free after its sales slipped to 1,250, not long after the local council began distributing its h&f news publication to 75,000 homes on a fortnightly basis.

Greenslade added: "How much evidence does the government need before it looks more closely at the impact of council papers?

"In June last year the Digital Britain report acknowledged the negative impact on independent local newspapers of local authority newspapers. As far as I can see, nothing concrete is being done while everyone – Audit Commission, Ofcom, OFT and, of course, the government  – passes the buck."