Leading article: Click here for democracy

We extended a cautious welcome to the Government's Spending Challenge when it was launched last summer. It was a consultation on the internet, which invited members of the public and public servants to submit ideas for cutting public spending. As we report today, Nick Clegg, the Deputy Prime Minister, is running a parallel exercise called Your Freedom to seek suggestions for laws and regulations that should be scrapped.

As we said in the summer, such digital plebiscites are gimmicky, unrepresentative and risk being exploited by lobby groups. Yet they can also breathe new democratic life into government. The Your Freedom exercise is a way to find out what unnecessary laws cause most irritation. It is also, like the Spending Challenge, a good way to mobilise the expert knowledge that is locked away at the lower levels of bureaucracy and among the users of public services. Unless you have run a small business or have had to look after a severely disabled child, for example, you are unlikely to know how frustrating simple interactions with the authorities can be.

All governments are attracted by the metaphor of a bonfire of red tape. Harold Wilson, as President of the Board of Trade, won favourable headlines for authorising a "bonfire" of war-time controls in 1948. More recently, Al Gore's main claim to fame before he discovered climate change was the Reinventing Government initiative that he ran as Vice President. And who can forget the Better Regulation Taskforce set up by Tony Blair in 1997?

One of the abiding weaknesses of the Labour governments of Mr Blair and Gordon Brown was that they tended to see regulation, legislation and new public bodies as the answer to almost any problem. By the end, Mr Brown was reduced to passing a series of laws – to halve the deficit in four years, in the most pointless example – as a form of press release.

The British Liberal tradition, now represented around the cabinet table, should be dedicated to the ceaseless struggle to limit the reach of the state and to cut back unnecessary rules, laws and quangos. Mr Clegg and his party are more instinctively sensitive to the threats to civil liberties than their Labour predecessors or their Conservative partners – although David Cameron's "liberal Conservatism" represents a welcome shift from his own party's authoritarian past. And it is instructive that the Your Freedom website has given expression to strong popular feeling about a number of threats to liberty – notably the abuse of anti-terrorism law, including to harass photographers and restrict protest; the US extradition treaty; and arbitrary powers for too many public bodies to snoop on electronic communications.

This valuable opening up of Whitehall has yielded insights and examples of burdensome and unnecessary form-filling, back-covering and public-sector make-work. Many of the submissions to the website are from people with many years' experience of running a business, or experience of minority, but not exceptional, circumstances, or from public servants on the front line. Many of them contain the sort of specific, specialist knowledge that managers find it hard to acquire, and which management consultants rarely supply.

The internet is an as yet barely discovered tool for transforming the public sector – usually a little behind the private sector – into more level hierarchies that innovate to meet the needs of the people they serve. Asking for suggestions is the easy bit, and only the first stage. The next stage, getting rid of pointless regulations and changing the way the public sector works, is harder. The cull of quangos carried out by the Government in October turned out to mean much less bureaucratic blood spilt than suggested by the advance publicity. But the change in the ruling assumption is clear.

As with the Spending Challenge, Mr Clegg's Your Freedom consultation is more than just a chance for poujadists to sound off. It may not be the Great Reform Act of his ambition, but it is potentially an exciting way to exploit the intelligence and experience of millions of people, either in their roles as citizens or as public servants. It is a pioneer example of how the democratic potential of the internet could be harnessed for the common good, and for that, Mr Clegg's reputation, which was built up and battered so extravagantly last year, deserves a small measure of rehabilitation.