On a visit to Scotland on Friday, Sir Keir insisted he is no fan of Ms Thatcher and said that he “profoundly disagrees” with some of her actions.
He said she did “huge damage” to communities across the UK – particularly in Scotland – only days after listing her as among former leaders who delivered “meaningful change”.
In an article for the Sunday Telegraph, he said Baroness Thatcher had sought to “drag Britain out of its stupor by setting loose our natural entrepreneurialism”.
The attempt to appeal to traditional Tory voters fell flat with some Labour supporters and Sir Keir was mocked by Conservative MPs as a Thatcher “fan boy” in the Commons.
But asked whether he was a fan at a Scottish Labour gala dinner in Glasgow on Thursday evening, he said: “No, absolutely not.”
The comments, heard on an audio recording, were met with applause by the audience in Scotland, where the former Tory leader’s privatisation agenda hit particularly hard.
“She did terrible things, particularly here in Scotland which everybody in this room, myself included, profoundly disagrees with,” Sir Keir said.
“The point I was trying to make in a piece that we penned last week was that there are some political leaders who have a mission, a plan, that they implement,” he told the audience.
The Labour leader went on to say: “[Clement] Attlee, of course, was one of them, the ‘New Jerusalem’. Thatcher, whether you liked her or you didn’t like her, you couldn’t say she didn’t have a plan, or a mission.”
Sir Keir added: “You can say someone has a mission and a plan and disagree profoundly with them.”
Baroness Thatcher won three general elections in her 11-year reign, but remains a divisive figure, including over an agenda of privatisation that saw the decline of industries such as coal and steel.
Scottish Labour leader Anas Sarwar did not repeat Sir Keir’s supportive comments this week, instead describing Baroness Thatcher as a “destructive force for our country”.
Sir Keir was following in the footsteps of his predecessor Sir Tony Blair, who also praised the Iron Lady in the run-up to his 1997 general election landslide.
But he faced a furious backlash from left-wing MPs, with Beth Winter saying the former Tory PM “caused poverty and deprivation not seen since the Dickensian era”.
Some backbenchers urged the leadership to distance itself from any praise for Ms Thatcher. Labour MP Ian Byrne said her legacy was “inequality, hunger, destitution and misery”.
Earlier this week, Labour’s national campaign coordinator Pat McFadden said he would not use the word “admire” to sum up how he felt about Ms Thatcher, and would instead say she was “successful electorally”.
Meanwhile, two people have been charged in connection with alleged disorder offences following a protest during which Sir Keir was confronted by pro-Palestine activists.
On Thursday night, Police Scotland said a man, 33, and a woman, 26, were arrested after Sir Keir was faced by protesters as he arrived in Glasgow.
Footage showed him arriving at Glasgow Central station, where a group of activists were waiting with Palestinian flags.
Sir Keir has faced criticism for refusing to back a ceasefire in Gaza, with the party leadership in favour of calling for humanitarian pauses to allow people to leave the territory and for aid to enter.
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