Margaret Thatcher was urged to "leave Liverpool" to the far-left Militant group in the 1980s, a former adviser has revealed.
Tory peer David Willetts, who was a political adviser to Thatcher at the time, told the prime minister that Liverpudlians "should live with the consequences" of voting for Derek Hatton.
Hatton was deputy leader of the Militant-controlled council which set an illegal budget in Liverpool in protest at local government spending cuts made by Thatcher’s government.
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Supporters of Militant point to the wave of building it initiated in Liverpool, replacing slum housing and improving sports and other leisure facilities.
But the council did not have enough money to pay for its programme, and action by the district auditor was averted only by taking out loans.
A move to apparently issue redundancy notices to every single council employee - ostensibly as a negotiating tactic - was widely criticised.
Labour leader Neil Kinnock used a conference speech to attack Militant for "the grotesque chaos of a Labour council hiring taxis to scuttle round a city handing out redundancy notices to its own workers".
Lord Willetts, speaking at a Conservative Party conference event, said: "I remember when I was working for Margaret Thatcher and Liverpool was getting into more and more difficulties.
"I can still vividly remember an argument with her when I basically said we should leave Liverpool alone.
"If the people of Liverpool voted for a left wing council, which is doing damage, then that's because that's what they voted for.
"If we genuinely devolve power they should live with the consequences of what they democratically decided to do."
Lord Willetts said Thatcher disagreed and argued "whatever happens in Liverpool, it will ultimately be the responsibility of the national government".
The former prime minister eventually responded by dispatching Environment Secretary Michael Heseltine to Liverpool as "minister for Merseyside" to lead a programme of urban regeneration.
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