Conservative Cabinet member Eric Pickles has attacked five London councils for behaving like Russian president Vladimir Putin over their alleged attempts to drive local newspapers "out of business".
The Communities and Local Government Secretary has given the five Labour-run boroughs a fortnight to defend their actions and to explain why legal proceedings should not be taken against their "propaganda on the rates".
Mr Pickles described the council-published newsletters as "Town Hall Pravdas", a reference to Russian political newspapers associated with the Communist Party of the former Soviet Union.
"It is scandalous that bloggers have been handcuffed for tweeting from council meetings, whilst propaganda on the rates drives the free press out of business. Only Putin would be proud of a record like that," he said.
"Localism needs robust and independent scrutiny by the press and public, and municipal state-produced newspapers suppress that. Town Hall Pravdas not only waste taxpayers' money unnecessarily, they undermine free speech."
Formal letters have been sent to the five councils responsible for Greenwich Time, Hackney Today, the Newham Mag, Waltham Forest News and (Tower Hamlets) East End Life.
The letters are the first in a series of measures Mr Pickles could now take to force them to comply with the Publicity Code for local authorities, part of the new Local Audit and Accountability Act passed in January.
All publicly-funded news sheets now published by local authorities should be objective, limited in frequency and represent value for money.
However, in all five cases, the freesheets were found to have been printed too often, with the Greenwich and Tower Hamlets' papers published at least 50 times a year.
The provisions were strengthened by Parliament after ongoing concerns that a small number of local authorities were breaching the publicity code.
Any council that fails to adhere to these provisions could face a court order requiring compliance.
Mr Pickles said: "I have given written notice to councils most clearly breaching the Publicity Code, noting that Parliament has passed new laws to tackle this abuse. We are prepared to take further action against any council that undermines local democracy - whatever the political colour."
He added: "We have changed the law to protect the free speech of councillors. If councillors and political parties want to campaign and put out political literature, they are very welcome to do so, and it's an important part of our democratic process. But they should be using their own money, rather than taxpayers."
The pressure faced by newspapers in the capital was illustrated recently when publisher Trinity Mirror announced the closure of a free newspaper series in west London, with up to 15 jobs facing possible redundancy.
The Fulham and Hammersmith Chronicle series, which had a free distribution of 45,490 according to the most recent ABC figures, is to be axed at the end of the month.
The company said the series, which also includes the Westminster Chronicle and Kensington and Chelsea Chronicle, had become "unsustainable".
Staff were told the news at a meeting last Friday. According to industry website Hold the Front Page, none of the other Trinity Mirror titles currrently run out of Uxbridge are under threat of closure.
The Fulham and Hammersmith Chronicle staged a long-running battle with Hammersmith and Fulham Council over its fortnightly paper H&F News.
In 2010, the Chronicle launched its Proper Papers Not Propaganda campaign against the council's freesheet, saying it was purposefully misleading residents by looking like an independent newspaper in design, despite being written by spin doctors.
The coalition Government's move to end the dominance of "Town Hall Pravdas" eventually resulted in H&F News ceasing publication in April 2011.
A spokesman for the Royal Borough of Greenwich indicated it intends to defend its publication.
"The council has received notice from the DCLG that, having had regard to the information made available to him, the Secretary of State is proposing to direct the Royal Borough of Greenwich to comply with the Code of Recommended Practice on Local Authority Publicity," the spokesman said.
"The council believes it is compliant with the code and has asked for sight of the 'information' the Secretary of State has based his notice on, in order to rebut it."
The Local Government Association rejected suggestions that council free sheets compete unfairly with local newspapers.
The chairman of the LGA's improvement and innovation board, Peter Fleming said councils actually "subsidise" the local newspaper industry to the tune of £40 million a year due to the legal requirement to publish statutory notices.
"The reality is that local newspaper circulations are on the decline and are not always the best way of reaching residents with key information," he said.
"Council magazines have proved to be the cheapest and most effective way for them to tell people about local services, events and issues. Councils should be free to make decisions based on what works for their communities and on feedback from their residents who, if they are unhappy, can make their feelings known locally.
"We would urge the Government to reform the outdated regulations which require councils to spend taxpayers' money on expensive adverts in local newspapers."