It was a moment that proved a turning point for Derek Hatton - and for the Labour Party as a whole.

A leading figure in the Trotskyist group Militant, Mr Hatton was deputy leader of a Liverpool council that was dominated by the left wing faction.

In the summer of 1985, the council had run up a deficit after setting an illegal budget in its battle against the cuts imposed by Margaret Thatcher's government.

It was a radical move that fit with Militant's slogan: “Better to break the law than break the poor”.

That September, the fight came to a head. Having been warned of swingeing job losses unless he cut services, Mr Hatton decided to call the government's bluff in an attempt to get Mrs Thatcher to bail out the council.

In a high-stakes ploy, he sent redundancy notices to thousands of council workers. Despite assurances that the redundancies wouldn't be carried out, the unions refused to hand them out. So Mr Hatton got taxis to deliver them instead.

Derek Hatton with Tony Mulhearn in 1986 credit: Srdja Djukanovic

The move caused a national outcry and left some Labour members feeling betrayed by their own side.

"If I had the time again… I probably would say I wish I could’ve communicated with more people," he said in an interview with the Independent in 2015. "But you can’t get round 31,000 people."

Soon afterwards, the Labour leader Neil Kinnock, now Lord Kinnock, delivered a scathing speech at the party's conference in Bournemouth.

“I’ll tell you what happens with impossible promises," Lord Kinnock said. "You start with far-fetched resolutions. They are then pickled into a rigid dogma or code, and you go through the years sticking to that: outdated, misplaced, irrelevant to the real needs, and you end in the grotesque chaos of a Labour council – a Labour council! – hiring taxis to scuttle round a city handing out redundancy notices to its own workers!”

"Liar!" shouted Mr Hatton from the audience.

“I’m telling you, and you’ll listen," Lord Kinnock responded directly. "You can’t play politics with people’s jobs and with people’s services or with their homes.”

Margaret Thatcher and Neil Kinnock in 1985 credit: PA

It was the starting gun of a prolonged campaign to rid the party of its far Left individuals, who were widely blamed for making Labour unelectable.

Mr Hatton went on to be expelled from the party the following year, along with 46 other councillors who had run the illegal budget.

Despite being fiercely opposed to many of the party's policies and decisions when they came to power, particularly the Iraq war, he still considered himself a Labour man. "During that 30-odd years that I was expelled, I never once stood against, supported, voted against any Labour candidate," he told the Mirror on Monday.

Yet he was still very much on the outside looking in.

"My days in politics were a very long time ago and I lost interest in it after I was expelled from the city council," he told The Telegraph in 2008.

"I don't know many other people who are as passionate for it as I was then, but I came to a point where there was nothing more to be done so I moved on."

But now he is back. More than three decades after being kicked out of the Labour Party, the 71-year-old has been welcomed back into the fold.

His passion was rekindled by the emergence of Jeremy Corbyn as Labour leader in 2015. At the time, he described the then 66-year-old as "fresh and new", though his expulsion meant he wasn't able to vote in the leadership ballot.

"The irony is that even though I haven’t got a ballot form, I’ve had so much of a say over the past two months, on every single political programme going… it doesn’t really matter any more."

Mr Hatton had applied in 2016 to rejoin the party, along with 75 other activists linked to Militant. But their request was rebuffed by Iain McNicol, the then Labour general secretary, on the grounds that they were affiliated to rival parties.

Then, 33 years after being denounced at the party's annual conference, it was a speech by the current leader at the same forum that convinced Mr Hatton to apply to rejoin the party, recognising there had been a seismic shift in Labour.

“What I have seen over the past year or two, particularly with Jeremy Corbyn and people around him is a move along the lines that I would have wanted to see in the 80s,” he told the Liverpool Echo last year.

“I never thought I would see a situation where there is a Prime Minister in waiting who stands on every picket line, who is talking about nationalising the means of production, who is saying he is going to take on the billionaires.

"This is the sort of thing you would never have dreamed that a Labour leader would have said - certainly no Labour leader in my lifetime.”

There was another moment at the conference that demonstrated Mr Hatton and his brand of politics was back in favour. Speaking to Labour's Women's Conference in Liverpool, Shadow equalities minister Dawn Butler praised councillors who were fighting against cuts imposed by Theresa May's Government.

"Conference, we are in Liverpool where over 30 years ago the council stood up to Thatcher and said, better to break the law than break the poor," she said.

Now, with Jennie Formby as Labour’s general secretary, Mr Hatton is a member once again - with the party in as much turmoil as it was in the 80s.

Seven Labour MPs quit on Monday in protest at the leadership's stance on anti-Semitism and Brexit, with Mr Corbyn braced for more to come.

"For them to leave now is at best hypocritical and at worst dishonest," he told the Echo. "All seven of them increased their majorities standing on a Jeremy Corbyn manifesto."