There's only so much local government can do without state support. With the current round of spending cuts, UK councils are being squeezed tighter than ever. I read this week in the paper that 2000 jobs in Manchester Council and 700 in Salford Council are being axed, and that's two big cities within a few miles of where I live.
People in general seem to be quite cynical about the national government, whoever happens to be in charge. Governments always do questionable things that the public aren't always happy with, but there are times when the public isn't interested enough and they can get away with more. These days, more and more people are more engaged or at least take an interest in politics, because they are feeling the effects more directly (the recent rise in VAT from 17.5% to 20% on certain items, for example). People take note when a politician says one thing and does another (like Nick Clegg's position on tuition fees).
When it comes to local government however, people are definitely less engaged. Whether its the single issue protestor, the local busybody or just a concerned parent, the people who care about local issues tend to be fewer and generally people with strong wills and beliefs about what should happen, and attempt to get a more direct change from their local government. Of course, the red tape machine doesn't move quickly, so issues tend to need years of determined interest before action is eventually taken.
With the recent political awakening, I suspect more people will look to local government as the first point of call to voice their concerns and attempt to affect a change. There is a general frustration that I suspect is out there though, and with the slow turning cogs of bureaucracy, there will be a move for the public to take more direct action, either through strikes, protests and similar movements, and that has been seen in recent months especially.
All that said, however, we should come back to the matter at hand - how much influence the local governments should have to make decisions, and how much national government should have. Of course, there should be something of a top-down approach in some sense, with the national government setting the laws of the land, but there should be some local government support, and freedom to take care of local issues, which they can more easily do since they are on the 'front line', as it were, of the issues that people genuinely care about. There should also be more avenues for local feedback to improve and optimise efficiency, and to get the general mood (and not through polls, which generally have specifically designed questions to get the sort of answer you want) of the public.
In general, the way governments should aim to work is as invisibly as possible, and intrude as little as possible in people's lives. With the recent moves from the US Department of Homeland Security to install videos in supermarkets, for example, it is certainly not aiming to move in that direction.