It promises to be its first comprehensive statement on local government's role in the political system.
The DoE played down the significance of the move, saying it was protocol for ministers to respond to a House of Lords ad hoc committee in this way. 'It would be unusual if we were not to respond with a white paper,' a spokesman said.
However, the Association of Metropolitan Authorities, which successfully lobbied for the establishment of the inquiry, greeted the white paper as a major breakthrough in central/local relations.
The paper is likely to be published the day after the Queen's Speech at the end of October.
It promises to be the most comprehensive statement to date of the constitutional position of local government. The local authority associations failed to get a clear statement of the relative positions of central and local government included in the guidelines on relations agreed by prime minister John major in November 1994.
The cross-party inquiry's recommendations for relaxing government controls on councils closely reflect current Labour Party policy.
For example, it recommends that capping should be ended as a 'standard procedure', echoing new Labour's plans to retain it as a last resort.
The inquiry also seeks returning control of business rates to councils and granting them a power of general competence - both key Labour policies.
Sources close to the committee said the only serious argument between Labour and Conservative peers emerged over whether CCT should be abolished. Lord Hunt of Tanworth, the committee's chairman and a crossbencher, steered a middle course by recommending a simplification of the government's regime and a review into whether CCT should become voluntary.
Again this position now more closely resembles Labour policy than the outright opposition of Labour Lords on the committee.
Labour is now proposing to retain some vaguely defined last resort compulsion for councils that do not provide a good service to their electorate.