The alternative I have described is also the model upon which the EU is run, Gromit. The big difference is that whilst you can get rid of the national government (who would oversee the local executives in charge of emptying the bins) you cannot get rid of the EU commissioners. However, that's another argument.
More than 80% of money spent by local authorities comes from central government. It seems reasonable to me that they should therefore have ultimate say in how that 80% is spent. Local councillors may think they hold the purse strings but in reality they have very little scope to adjust the council's expenditure. They may close a library here or open a crèche there, but that is relatively small beer. The big money goes on education, housing and social services. My local authority spends 80% of its income on these items and the way they spend it is virtually un-negotiable.
There is always conflict between local and national government (even when they are of the same political persuasion) and the whole shooting match is an expensive waste of time and money. The cost of the councillors themselves is more than enough to see any "cost/benefit" analysis fail but the cost of the councils in total is vast when staffing and property costs are included.
However much it costs to fly the Palestinian flag from Tower Hamlets and Bradford municipal buildings it is 100% too much. Local authorities have no right to use public money to expound their political opinions and their assertion that they are not making a political statement is absolute bunkum.