Sir Hugh said he believed the arguments for locally based policing were 'flawed'.
His proposals may provoke heated debate. Some chief constables and local authorities are strongly opposed to more centralisation while the Security Service, the Home Office and Scotland Yard may interpret his comments about terrorism investigation as criticism of recent changes.
Delivering the annual Police Foundation lecture in London last night, Sir Hugh said: 'Crime is indeed local, but most major crime is . . . national and international. And whilst the delivery of general policing service is local and should be tailored to prevailing circumstances and individual community needs, the police force itself does not need to be local.'
Recent measures to improve anti-terrorism operations, such as handing over responsibility for intelligence to the Security Service and co-ordinating investigations between Scotland Yard and provincial forces, did not go far enough, he said. 'We really must face a serious threat with a realistic and professional response, even at the risk of offending a few sensibilities . . . nor should we hold back because of doubts about accountability.'
A 'bolder thrust' was necessary, he said. A national anti-terrorist unit, incorporating the Metropolitan Police Special Branch, the Security Service and the Anti- Terrorist Branch, would handle informants, gather intelligence, investigate intelligence leads and have a training, legal and scientific support unit.
The head of the unit would be at the level of Metropolitan Police Commissioner, but could be from the 'security, diplomatic or civil services' as well as the police, and would be responsible for appointing investigating officers for specific incidents.
Sir Hugh said a national crime squad to collect intelligence and carry out investigations was needed despite the recent creation of a National Criminal Intelligence Service and reorganisation of regional crime squads.
'Is this not the way in which we ought to be tackling the ruthless and sophisticated criminals whose activities involve such large sums of money that they threaten to undermine legitimate businesses?'
Sir Hugh officially outlined for the first time the explosives and weapons given to the IRA by Libya, calculated following the 1987 Eksund seizure. It was estimated the IRA had received six tons of Semtex, 20 SAM missiles, 1,500 plus AKM rifles, 1.5 million rounds of ammunition, 50 RPG7 rocket launchers, 10 flame-throwers and a quantity of general purpose and heavy machine-guns. About one third of this had been recovered.
The lecture is often used to float controversial ideas. Sir Hugh's speech marks him down as a candidate to succeed Sir Peter Imbert, the Metropolitan Police Commissioner, due to retire this year.