A Taxing Time For Local Papers?

A good deal of adverse comment greets the suggestion by Guardian editor Alan Rusbridger that the crisis facing local newspapers be addressed by some form of subsidy from public funds (http://www.guardian.co.uk/media/2008/nov/10/newspapers-the-future-alan-rusbridger ).
He asks, "Is there any reason why local newspapers -- whether in print, on broadband or broadcast -- shouldn't compete with the broadcasters for some form of subsidy in return for providing the public service of keeping a community informed about itself?"
Is Rusbridger advocating a subsidy for the likes of the Oldham Echo? If so, would it come out of the licence fee, or would it be an additional subsidy? Either way, it would be politically unacceptable.
Rusbridger sketches out the latest Ofcom proposals for partnerships between local papers & TV & online broadcasters (BBC?) which may be feasible, but the funding issue is still key.
However, he throws another hand grenade into the arena when he ponders:
"The present competition restrictions might be reviewed, with the Office of Fair Trading being asked to consider whether newspapers are a distinct economic market, or part of a wider information ecology. There would be greater opportunity for cross-promotion and the possibility of additional funding from regional development agencies and local authorities."
Regional Development Agencies take their money from central government, ie., the taxpayer. Councils receive a portion of their revenue from Council Tax. On both fronts, there would be strong opposition, & rightly so, to the notion that local papers, which happily accept advertising revenue already, should be effectively bailed out.
Rusbridger refers to Michael Lyons' speech last month (http://www.pressgazette.co.uk/story.asp?sectioncode=1&storycode=42236&c=1 ), commenting that some hacks on local papers recognised the merit in his comments.
Reaction to Rusbridger's article is, not surprisingly, largely hostile in the comments section (with a contribution from yours truly). Roy Greenslade is equally sceptical of Rusbridger's proposals (http://www.guardian.co.uk/media/greenslade/2008/nov/10/theregions-bbc ).
Indeed, the arguments put forward by the Guardian's editor would seem to be further undermined by what amounts to a crib sheet in Media Week for advertisers on the merits of placing advertisements in the re-launched Echo (http://www.mediaweek.co.uk/news/859266/Liverpool-Echo-lives-its-iconic-status/ ):
"Since being founded 127 years ago, the Echo has represented the voice of Liverpool and reflected the community it serves. The new look should build on this brand strength."
Voice of Liverpool? Reflective of the community it serves? At a time when it faces a reader boycott over the move to Oldham, resulting in the loss of up to 100 jobs? Someone at Media Week really should have done their homework. Indeed, its piece is contradictory, as it concludes:
"The loyalty of readership is not in doubt, but now advertisers are being offered a fresh new-look newspaper that may improve the diversity of the audience."
If the Echo's voice has reflected Merseyside in its entirety, why is there still scope "to improve the diversity of the audience"?
Advertising revenue appears not to be imperilled at the Echo. As for circulation figures, that's another question entirely.