Labour Party organisers have dropped Ms Lashley, the deputy Lord Mayor, from the panel of vetted candidates from which local parties select who should contest local elections.
Ms Lashley, 53, is due for re- election in May in the safe Labour seat of Granby, where most black Liverpudlians live. Had she held the seat for Labour, she would have become Lord Mayor, the first black to hold an office dating back to 1207. Without endorsement as a Labour candidate, she is unlikely to win Granby, where her popularity has been in decline. Many local people were critical of her record as a councillor before the Liverpool Echo published details of her criminal record this month.
Ms Lashley sat impassively through yesterday's city council meeting, which did not discuss the issue. She has not commented on her future but has instructed lawyers to sue the newspaper for libel.
Labour and opposition Liberal Democrat councillors initially condemned publication of Ms Lashley's convictions, but support for her position as deputy Lord Mayor has subsequently diminished.
'It was not because she has been a prostitute,' a senior Labour councillor said yesterday. 'It is because it appears she has a conviction involving someone else's money.'
The Labour group leader, Harry Rimmer, is understood to have tried unsuccessfully on several occasions to persuade Ms Lashley to step down as the mayoral deputy. On Monday, Mr Rimmer and his deputy, Frank Prendergast, are believed to have drawn up a resolution advising her to quit. They were overruled, and a Labour group meeting attended by about 25 councillors voted with four abstentions to continue to support her. The decision to oust her had been taken by regional party officials who will not be swayed by the Labour group vote.
One of Ms Lashley's supporters said last night: 'She has been the victim of a smear campaign.'
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