What applies nationally must apply locally. All politics is local, a former US Speaker of the House, Tip O’Neill, once famously said. He went on to say that politicians must appeal to the simple, mundane and everyday concerns of those who elect them into office.  It is those personal issues, rather than big and intangible ideas, which most voters care most about, contradicting the notion that, in local elections, people are casting votes to “send a message” to the highest levels.

That may be the case in the United States, where there are still some vestiges of grass-roots democracy. But in Britain, the very idea that we have local democracy is a fiction. We have a system of local authorities which function mainly as central government agencies. Their main task is to administer centrally-defined law at a local level.

Local government units, whether counties, second-tier districts or unitary authorities, have no independent existence or powers. They are defined through Acts of Parliament and owe their existence, their boundaries and their powers to the diktats of central government. They are funded primarily from the centre and the nature of monies which can be collected locally is directed by the centre, as well as the amounts and terms of collection.

This, by any definition, is a top-down society. But it is also one which has become increasingly so over time. As a result, local elections are little more than opinion polls on the performance of central government, without even the benefit of random sampling techniques. There is no point in getting excited over the election of local officials when almost the entire extent of their powers is determined by national law.

In our Harrogate conference, therefore, local government “reform” featured high in our discussions, although – in retrospect – one has to acknowledge that the very idea of “reform” is absurd. How can you reform something you do not have? Since we only have agents executing directives from Whitehall and Brussels, we need to start from scratch. Centrally defined agencies must be replaced with truly local structures. We need local government in the proper sense of the word, under the control of their people.

To that effect, our aim must be to invert the entire structure of the British state. Instead of the top-down systems, we need to start locally and create structures built from the bottom-up.

This is not “localism” in the sense proposed by Prime Minister David Cameron, or anything like “The Plan” offered by Conservatives Daniel Hannan MEP and Douglas Carswell MP. We are not impressed by the idea of central government condescending to hand down some tiny fraction of its power, under carefully controlled conditions, ready to claw it back at a moment’s notice. Theirs is not a transfer of power – it is the granting of a license.

What we are proposing is nothing short of revolution. The fundamental building blocks of our democracy should become independent local units which owe their existence to the people who live within their boundaries. Instead of being statutory bodies – i.e., defined by statute, from which they derive their powers, under the control of central government – they become constitutional entities. Their existence, powers and revenue-raising capabilities are defined by the people via the medium of constitutions, approved by local referendums.

These local authorities – which could be counties, cities or the former county boroughs – become independent legislatures is their own right. Whereas local authorities were once permitted to make by-laws, defined and permitted by central government, true local government makes its own laws in its own name. Each district makes all the laws for matters exclusive to its area, using powers defined by its own constitution, applicable within its own boundary.

Some might think that local authorities are too small to become legislatures, but size is not an issue. Few people for instance, realise that Iceland, with a population of 313,000, boasts fewer people than the London Borough of Croydon (363,000) and very substantially less than the Metropolitan District of Bradford (501,000).

Yet Iceland is a sovereign nation. It has its own government, its own parliament, its own laws, its police and even its own fishing policy and navy to enforce it. Despite its small size, the country does tolerably well, with a GDP of $12.57 billion (146th in the world) and a GDP per capita of $38,500, the 24th highest in the global league (higher than the UK’s $36,600, the 33rd highest).  It also has its own local government, with 59 local municipalities.

In Norway, which has approximately five million inhabitants, there are 428 municipalities and 19 county authorities. More than half the municipalities have less than 5,000 inhabitants and only 14 have more than 50,000. The largest municipality is Oslo, which is also a county. It has approximately 620,000 inhabitants. But the smallest municipality is Utsira with 209 inhabitants.

In these two countries, there is no confusion about the nature of local democracy, making a significant contrast with the UK.  And here one of the most recent examples of the degradation of the idea of “local” government was in election of police commissioners in England and Wales during 2012. The tone was set by Home Secretary, Teresa May who refused to set a turnout threshold, arguing that “the people elected as police commissioners will have something that the current police authorities do not have, which is a democratic mandate”.

The candidate elected as commissioner for the former county area of West Yorkshire was Labour’s Mark Burns-Williamson, a man who polled 114,736 first preference votes from an electorate of just over 1.6 million. That gave him an effective mandate of 7.1 percent.  But even to claim that he lacked a true mandate is to miss the point. The election was cited as an example of local democracy, yet West Yorkshire has a population of 2.2 million people in an area of nearly 800 square miles. There are over 100 countries in the United Nations with populations smaller than West Yorkshire.

The assertion that such units, larger than many countries, can be considered “local” is laughable. Furthermore, it is absurd to argue that local government units all need a beneficent central government to make their laws, to fund them and even define their boundaries. Their very existence as administrative units, subordinate to the centre, is an affront to the very idea of democracy, when Iceland, the size of an English borough, is an independent nation state in its own right.

It follows that all national laws applying to subjects which fall within the remit of local government should become local laws. The local legislatures should be able to re-enact them if so desired, or they can repeal or revise them.

A consequence of this would be that the functions of central government would be drastically reduced. Mainly, the centre would concern itself with foreign policy and relations, including the framing of international law and making treaties. We would see central government take a hand in making maritime law, controlling deep water fisheries, and dealing with matters of national security and defence. In what would effectively become a federal-style body, central government would also concern itself with cross-border crime (where the perpetrators operate in two or more police districts), and serious, organised crime.

There then comes the inevitable question of who pays, and more particularly how government is paid. Control of taxation is at the heart of true localism, to which effect we believe local governments, structured as constitutional bodies, should become the primary collectors of tax. We would envisage that they collect most if not all the taxes from people and enterprises resident or operating within their areas of jurisdiction.

Instead of the system where only a fraction of their income is collected locally via Council Tax and charges, with the balance made up from grants from the centre, local authorities would collect their own taxes, such as Council Tax, but also income tax, sales taxes, corporation taxes and most other taxes currently collected by the centre. After they had taken what they needed to fund their own operations, they would remit the surplus to central government, acting as collection agents.

By this means, rather than the centre subsidising local government, the relationship would be reversed. Equity would be achieved by having poorer authorities remitting less, per capita, to the centre. The richer authorities, like the City of London, would pay more. The funding would be managed on the same basis as the precepts currently collected locally, from which are paid the police, fire services and transport authorities. 

Only in extreme emergencies would we expect any transfers of funds from centre to local authorities, such as in the case of a major natural disaster.  Norway, for instance, manages a system of wealth transfer between local authorities, without involving central government.

When local taxation prevails, allied with local democracy, there is every opportunity for variable rates and real tax-competition between local authorities. That in itself could result in something we have never had in this country - downward pressure on taxation.

This is the “small government” which so many people profess to want, but even then – despite the local units being constitutional bodies - that does not guarantee freedom from central government interference. We see in the United States constant tension between federal and state governments, and the encroachment of the centre. Here, as always, the currency of power is money. The federal government, with its own vast income stream - far larger than state revenues - is able to bribe States with cash inducements or bludgeon them by withholding cash.

The answer, therefore, must be to control the flow of money. The centre should have very limited taxation powers. It should not be allowed to borrow to finance a deficit, except in very exceptional circumstances, and only with the explicit permission of the people. It must not be able to bribe its way to power.

Taking in for the moment the idea of Referism (about which we will have more to say later), we see budgets at local and central levels controlled by annual referendums, firmly limiting the expansionary tendencies of all governments.  What is more, there is an important side-effect: Westminster MPs become even less important than they are now, while democratic representation at local level becomes more relevant and more important.

In some respects, this also solves some of problems we have with MPs. One might expect seats to be apportioned on a county basis, with approximately one per 120,000 head of population. This ratio gives a House of Commons roughly the same size as it is at present. The boundaries would be fixed.  As population varied, so would the number of MPs, keeping constituencies wholly within the bounds of specific local authority areas.

The reckoning should be, incidentally, based on population rather than electorate. Our MPs should be representing the interests of all of their constituents, not just those who can vote.

However, some might argue that, with a reduced workload, fewer MPs would be needed, with a ratio of perhaps 200,000 or more for each representative, possibly stretching to one per 500,000 head of population. Where the United States House of Representatives manages to make do with 435 voting members, our House of Commons might be able to reduce itself to less than 300, saving expense. We might expect numbers in the House of Lords to be proportionately reduced – with perhaps only a hundred or so working members needed.

Details of how and under what conditions individual MPs (and members of the upper house) are selected might be left to the electors of the county, set out in each local constitution and implemented by the local legislatures. After all, if we are to have localism, then the terms and conditions governing the employment of representatives should be decided locally.

We could also envisage a situation where MPs are no longer paid from central funds, but by their counties. It would be for the people of each county to decide how much their representatives were paid, how much should be allowed by way of expenses, and how they should be held accountable. Also, if one area wanted to introduce a method of MP recall, that would be up to them. Thus do we see democracy closer to the people, with government – local and national - under the direct control of the people. When you think about it, anything else isn’t democracy at all.