It had been thought that the authority would agree to the deal and this would have halted an industrial tribunal in Manchester where Ms Halford, 52, the suspended assistant chief constable of the force, has just finished giving evidence. The proposal would allow her to leave the force on health grounds and receive her full pension.
But yesterday, amid furious scenes in Liverpool, the 21 members of the authority failed to reach agreement and adjourned until next Tuesday.
Members of the authority were publicly arguing outside the authority's office even before the meeting began. They then spent three and a half hours furiously debating the issue in private. Meanwhile, the industrial tribunal in Manchester was reconvened, on its 40th day, with Anna Woolley, the chair, barristers and solicitors, waiting for a telephone call from the authority to say an agreement had been reached.
But it soon became clear the authority was divided for a variety of reasons. Some members felt they were being 'bounced' into a settlement by the Home Office as a means of preventing James Sharples, the present Chief Constable of Merseyside, from giving evidence to the tribunal along with Sir Kenneth Oxford, the former chief constable.
Ms Halford, who spent 26 days on the witness stand at the tribunal, is claiming sexual discrimination against the Home Secretary, Mr Sharples, Sir Philip Myers, Her Majesty's Inspector of Constabulary in the North-west, and the Northamptonshire Police Authority to whom Ms Halford applied for the post of deputy chief constable. Ms Halford applied nine times to various forces for promotion to deputy and was turned down on each occasion.
During her evidence to the tribunal Ms Halford said there was a 'desperate abuse' of the system within the Merseyside Police Force, whereby officers accused of disciplinary offences had then become sick and had been retired on health grounds.
Ms Halford faces a disciplinary hearing over allegations that she was in a swimming pool in her underwear while officially the most senior officer on duty. Over the past two weeks, lawyers acting for Ms Halford and other parties have been talking privately about reaching a financial agreement.
The cost of the tribunal, put at over pounds 1m so far, has worried Home Office officials quite apart from the allegations being made there. A deal, if it is eventually accepted, would involve a lump sum payment of more than pounds 120,000 plus an annual pension payment of around pounds 20,000 as well as an extra payment of about pounds 15,000.
After the police authority meeting had adjourned, Mike Storey, Liverpool City Council's Liberal Democrat leader, said: 'Because we have four new members on the authority, a number of us felt that all the information should be available to them.'
George Bundred, chairman of the police authority, said that a medical consultant had advised the authority that it should consider early retirement for Ms Halford on medical grounds.