A member of Jeremy Corbyn’s shadow cabinet has spoken approvingly at Labour’s conference in Liverpool of the Militant-dominated council which ran the city in the 1980s.

Shadow equalities minister Dawn Butler hailed the example of former councillors who set an illegal budget in 1985 in protest at cuts to central government funding.

The tactic was condemned in dramatic scenes at that year’s party conference, where then leader Neil Kinnock denounced “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”.

His intervention was a key moment in the drive to break the far-left Militant group’s hold over parts of the party, which ended with the expulsion of figures including Liverpool council’s deputy leader Derek Hatton.

Neil Kinnock Labour leader Neil Kinnock denounced Liverpool Council’s illegal budget in a speech to conference in 1985 (PA)

Speaking to Labour’s Women’s Conference in Liverpool, Ms Butler praised councillors who were fighting against cuts imposed by Theresa May’s Government.

“Local councils have seen nearly 50% of their funding cut – I want to give a shout out to all the councillors fighting every day against these Tory cuts,” she said.

And she added: “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.”

Mr Corbyn and shadow chancellor John McDonnell wrote to all Labour council leaders in 2015 calling on them to resist calls to set illegal budgets.

Labour peer Baroness Thornton criticised Ms Butler’s praise for the rebel councillors in a series of tweets.

“Great to be at Women’s conference, but am surprised that @DawnButlerBrent has just praised a Liverpool Council in the past – that of Derek Hatton – who issued redundancy notices to their own public sector employees, and failed to protect services too!” said Lady Thornton.

“And @DawnButlerBrent Derek Hatton’s Militant colleagues were misogynistic bullies. We should not be praising them at @UKLabour Women’s Conference.”

A Labour spokesman said: “The point Dawn was making was that like the Thatcher government of the 1980s, this Tory Government has prioritised tax cuts for the rich while cutting services like women’s refuges that save lives and keep women safe.

“Labour will invest in our communities to rebuild Britain for the many not the few.”

Conservative chairman Brandon Lewis said: “This is the sorry state of Labour today: Shadow cabinet members praising the hard-left militants of the 1980s.

“Labour has learnt nothing from the past and would take the country back to bankruptcy, job losses and worse public services.”