He then founded a splinter paramilitary group, Saor Uladh ("Free Ulster") whose activities were largely confined to Kelly's home area in east Tyrone.
In 1953 he made a speech in neighbouring Carrickmore which subsequently led to his arrest by the RUC and conviction for sedition: "I will not give allegiance to the foreign queen of a bastard nation.
Fianna Uladh's basic ideology - which placed it closer to Clann na Poblachta than to the Sinn Féin of that era - was summed up by Kelly in a speech made in Seanad Éireann in 1954: We in Fianna Uladh recognise the Constitution of the Republic of Ireland under which this State operates and we are prepared to work within its framework to extend its operation to the whole of Ireland.
[12] In return for the Clann's support for the Second Inter-party Government (1954–1957), Taoiseach John A. Costello ensured that the votes of Fine Gael councillors elected Kelly to the Seanad on the Labour Panel.
[13] Kelly spoke as a senator, in support of a motion that all elected parliamentary representatives of the people of "the six occupied counties of Ireland" should be given a right of audience in the Dáil or in the Seanad.
Costello's Government, although it decided against the re-introduction of internment, responded to the activities of Saor Uladh and the mainstream IRA by stepping up security measures against these groups, leading to the arrest of prominent republicans.
In response to this and to a deterioration in the state of the economy, Clann na Poblachta withdrew its support and Costello was left with no choice other than to call an election.