The government was committed to reducing the level of public spending and targeted the high spending left wing Labour councils such as Liverpool. Rate capping prevented local councils raising local taxation beyond certain levels with central government funding being the only other main source of income. This clearly curtailed local government spending and instigated a series of battles between the Conservative government and the Liverpool city council leadership.

Liverpool City Councils high spending created a large financial deficit. The size of this deficit ultimately resulted in over 31,000 council employees being issued with redundancy notices. This action, intolerable to many trade union members, split the unions and instigated an enquiry by the Labour Party’s National Executive.

The following video clip, illustrates Derek Hatton’s’ rise to local leadership, the attitudes of the labour leadership, its delegates and members of the party’s far left. Derek Hatton can be seen shouting, “lies” during Neil Kinnocks’ speech and Left wing Labour MP Eric Heffer is seen walking out of the conference in disgust.

Shortly afterwards, the labour leadership expelled the militant tendency from the party and Derek Hatton, was ousted from the leadership of Liverpool City Council.