Loss of Government advertising: is this the real threat to the future of newspapers?

The debate about the reorganisation of The Herald newspaper group in Glasgow by Newsquest was lively (you can read a transcript here) in the Scottish Parliament, with many MSPs condemning the way journalists have been made redundant and have to reapply for their jobs.
But a point raised in the debate by MSP Ted Brocklebank could have a much wider and disastrous impact on the press, the potential loss of Government and local authority advertising from newspapers.
This is what he said: "Until now, national and local newspapers have been able to rely on councils and the Government advertising recruitment opportunities, and publishing public and statutory notices. However, local authorities and the Government are turning to the electronic media. Today, I have asked written questions about the amount that is spent by the Scottish Government on local and national press advertising per annum, and I have requested similar figures from the councils.
"Clearly, government at all levels must seek to save costs. As the Minister for Enterprise, Energy and Tourism will no doubt confirm, the Scottish Government is in five different areas of Scotland trialling the publication of public and statutory notices on the web. If the trials are successful, it could mean a massive loss of advertising revenue for the Scottish press, and newspapers going to the wall."
This is a concern not just in Scotland, but in the rest of the UK. If Government and local authority advertising migrates to state-owned websites it would be a disaster for the press.
The Newspaper Society and Society of Editors have already raised concerns about the possible ending of statuatory advertising of planning applications.