Thatcher was urged to let Liverpool fall into decline

Margaret Thatcher was privately urged by senior ministers to consign Liverpool to a fate of "managed decline" after the Toxteth riots and spend regeneration money elsewhere, according to official papers made public for the first time today.

The secret advice from sceptics led by the Chancellor at the time, Sir Geoffrey Howe, lays bare evidence of a long-suspected animus within the Thatcher government against Merseyside, which culminated in the confrontation with the Militant-led Liverpool Council in 1985 and led to decades of rancour between the city and the Tories.

The explosion of violence in the rundown inner-city district of Toxteth in July 1981 shocked Mrs Thatcher. Her Environment Secretary and eventual nemesis, Michael Heseltine, soon travelled to Liverpool to lead a programme of regeneration as a new "minister for Merseyside".

But the documents, released under the 30-year rule by the National Archives, show that behind the scenes leading figures were advising the Prime Minister to abandon Liverpool to a slow death of urban deprivation, warning her that a concerted effort to regenerate the city would be like "trying to make water flow uphill".

Sir Geoffrey wrote to Mrs Thatcher: "We do not want to find ourselves concentrating all the limited cash that may have to be made available into Liverpool and have nothing left for possibly more promising areas such as the West Midlands or, even, the North-east. It would be even more regrettable if some of the brighter ideas for renewing economic activity were to be sown only on relatively stony ground on the banks of the Mersey.

"I cannot help feeling that the option of managed decline is one which we should not forget altogether. We must not expend all our limited resources in trying to make water flow uphill." The documents show that the Chancellor was aware of his incendiary words, advising Mrs Thatcher that the term "managed decline" should not be used, "even privately".