Controversial BBC plans to develop local news websites are expected to suffer a setback today, with ministers voicing concerns over the impact that the scheme will have on the viability of local newspapers.

The contentious scheme comes under the spotlight as the Daily Mail and General Trust (DMGT) announced that advertising at its local papers was down over the past two months and that it was cutting jobs at its national and regional titles.

The £68 million BBC plan is not thought to have impressed Ofcom or BBC Trust officials - who prepared background paperwork for a meeting of the trustees in Cardiff yesterday, in part to evaluate the plans. The expectation is that trustees will follow the conclusions taken by looking at the market analysis from Ofcom and the public value analysis from trust officials and conclude the plans are not distinctive enough to offset the impact on the local press.

Andy Burnham, the Culture Secretary, is understood to have registered his concerns about the BBC scheme, although he is said to be “confident that the BBC Trust will do the right thing”.

In theory, Mr Burnham has the right to intervene if he believes that the BBC Trust has not done its job properly, but he is not expected to use the reserve power because it would represent a significant intervention in the trust's work.

The speculation came as the trust also met to discuss Russell Brand and Jonathan Ross's prank phone calls, which were broadcast on Radio 2 last month. Mr Ross is not expected to face further penalty, but the report is expected to make uncomfortable reading for Lesley Douglas, the former controller of Radio 2.

The BBC will detail how the calls came to be broadcast, and what happened in the week between broadcast and the publication of their content in a Sunday newspaper. It is thought that Ms Douglas was partly aware of the content of the calls, but will be criticised for not being curious enough.

Newspaper executives were hopeful yesterday that they were winning the argument when local newspapers are mired in the worst financial crisis for more than a decade. Martin Morgan, the chief executive of DMGT, owner of the Northcliffe newspapers group, said: “There are signs that the BBC are backing down on this scheme.”

DMGT revealed that advertising at its local newspapers was down by 24 per cent in September and by 28 per cent in October, and there were no signs of improvement, as it reported full-year results yesterday. Similar drops have been reported by other local publishers, who fear that the BBC could take audience and, ultimately, advertising from their own local websites.

Tim Bowdler, the chief executive of Johnston Press, owner of the Yorkshire Post, said he had heard talk that the BBC scheme would not get past the trust, and said he would be “clearly delighted if the plans were scrapped, and pleased if they were delayed”.

DMGT also said that national newspaper advertising was down by 8 per cent in September and by 10 per cent in October, with the Daily Mail, its flagship title, performing in line with those trends. The company is cutting 400 jobs out of 7,000 employees at its national and local titles and aims to save another £100 million a year from non-redundancy efficiencies.

Peter Williams, the DMGT finance director, said that the downturn was so sudden and severe, “we are already in uncharted territory”, but that it would not close or merge titles.

For the year to September 28, DMGT reported a 3 per cent increase in revenues to £2.3 billion, reflecting growth in its electronic information businesses and newspaper advertising in the early part of the financial year. It posted a loss of £68 million, after writing off £264 million on previously acquired regional newspapers.

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