Many of these large-scale industries were supported by government subsidies, fearful of the consequences of high unemployment that would result from their closure. Industrial losses supported by public money were contrary to the Conservative monetarist policy and subsidies were withdrawn. Consequently, many industries closed or their labour force contracted dramatically through the early 1980s. High unemployment, particularly in the industrial North, ensued.

The Labour party was after the 1979 General Election defeat, to spend the next eighteen years in opposition and experienced in the early to mid 1980s, a rise of the hard left, known as the militant tendency. The hard left policies of the militant tendency were not popular with the UK electorate as a whole, and their activities were considered by the Labour party leadership to be seriously damaging Labour’s chances of defeating the Conservatives at the next general election.

The hard left made some localised political gains, particularly at the local government level and sought to increase their influence within the Labour Party. One of the most high profile left wing controlled councils at the time was Liverpool City Council, largely under the control of the vocal deputy leader, Derek Hatton.

He was responsible for taking the Liverpool City Council into a direct confrontation with the central government, demanding considerably higher levels of central funding to finance a large local authority budget, clearly at odds with the public spending policies of the Conservative government.