Derek Hatton is one of five men including mayor Joe Anderson held after 15-month investigation 

Derek Hatton, the former Trotskyist deputy leader of Liverpool City Council, has also been arrested by Merseyside Police investigating alleged fraudulent property deals, MailOnline can reveal today.

Mr Hatton, 72, has been held on suspicion of witness intimidation.

He is said to be one of five people arrested as part of a 15-month long investigation by Merseyside Police, known as Operation Aloft. It was set up in August 2019 to investigate how certain deals between the council and property developers had been handled.

It came as Liverpool’s mayor Joe Anderson is defying Labour colleagues calling for him to stand down after his arrest.

Two other men, aged 33 and 46, were arrested for the same offences, while another, aged 25, was held on suspicion of witness intimidation alone. All the men are from Merseyside – none have been charged.

Mr Hatton was the ringleader of the Trotskyist Militant tendency in the 1980s which set an illegal budget in Liverpool – causing ‘grotesque chaos’ in the city – and brought about bitter divisions in the party. 

Known by the nickname ‘Degsy’, he and his colleagues infamously hired taxis to deliver more than 30,000 redundancy notices to workers in the city after refusing to implement local government spending cuts.  

For the past 18 years he has been owner of Derek Hatton Associates – a business involved in property development both in the UK and abroad. 

He was readmitted to Labour in February 2019 when Jeremy Corbyn was leader. But amid a huge backlash he was suspended just a day after his readmission was confirmed. A month later he withdrew his application.

Police held Joe Anderson for questioning on Friday on suspicion of bribery and intimidating witnesses. After being bailed the 62-year-old insisted he would continue to lead the city’s fight against the pandemic.

His stance was greeted with incredulity by both political opponents and voices from within the party, from which he is suspended.

‘Joe cannot continue as mayor while being investigated by the police,’ former Liverpool Walton MP Peter Kilfoyle said. ‘He can’t carry on.’

Two other men, aged 33 and 46, were arrested in the probe into deals between the city council and developers.

However, the 62-year-old – who has not been charged – has yet to give any indication that he will bow to the pressure.

In the statement, published by the Liverpool Echo yesterday, Mayor Anderson said: ‘I was arrested as part of Operation Aloft on Friday 4th December, and interviewed for 6 hours. 

‘I co-operated fully with Merseyside Police and will continue to be co-operative in their continuing enquiries.

‘I will be talking to my cabinet colleagues over the weekend to ensure the challenges our city faces with the Covid pandemic continue to receive the focus they deserve. 

‘I also support the Labour Party’s decision to apply an administrative suspension while this investigation continues.

‘I have been bailed to return in one month’s time. Given the investigation is continuing, and there are bail conditions, I will not be making any further comments.’

Mr Kilfoyle told MailOnline that Mr Anderson could not continue to ‘operate in the way he thinks he can’.

‘I think he should stand down from that position while this whole mess is sorted out and cleared up,’ he said.

‘I don’t think he can operate in the way he thinks he can.’ 

Councillor Richard Kemp, leader of the Liberal Democrats in Liverpool, has suggested Mr Anderson should stand down from official duties.

‘Firstly, mayor Anderson must follow precedent and immediately stand down from all official duties until cleared or convicted,’ he said. 

‘We all have deputies capable of carrying out our work.

‘Secondly, we must allow the police to carry out their enquiries. 

‘They have been working for 18 months now on a series of allegations relating to problems within the regeneration directorate in relation to the awarding of contracts and property disposals.

‘This is a complex matter and takes time.

‘Justice is best served by not speculating on any potential issues as these might compromise subsequent trials.’  

Mr Anderson shot to prominence in October after slamming the Government’s old tiered lockdown system for offering little financial support to Northern businesses facing collapse under the harshest restrictions.

Police have not confirmed the Mayor’s identity or that of the other suspects, but said a 62-year-old was arrested on suspicion of conspiracy to commit bribery and witness intimidation.

Merseyside Police said in a statement: ‘We can confirm that five people arrested in connection with offences of bribery and witness intimidation as part of an investigation into building and development contracts in Liverpool have been released on conditional bail pending further inquiries.’ 

It is understood that the veteran Labour politician was held at his home address in the Old Swan district on Friday.

Mr Anderson hit the headlines in October with his vocal criticism of the Government’s tiered lockdown system, which he branded a ‘shambles’. 

Liverpool was the first English region to be put into the top Tier Three – prior to the country’s second national lockdown – as cases surged in the city.

He accused the Government of railroading through its Tier Three measures for the city without local leaders agreeing to anything back in October. 

His pushback came alongside criticism from Manchester Mayor Andy Burnham, who also blasted the rules – with affected vast swathes of the North.

Alongside the 62-year-old, four others were also arrested.

A 72-year-old and a 25-year-old were arrested on suspicion of witness intimidation. 

Two other men – aged 46 and 33 – were accused of conspiracy to commit bribery and witness intimidation.

The arrests come as part of Merseyside police’s Operation Aloft – a 15-month operation looking into agreements between property developers and the council.  

A spokesman for Merseyside Police said: ‘Five people have been arrested by detectives in connection with offences of bribery and witness intimidation as part of an investigation into building and development contracts in Liverpool.

‘The arrests are part of an ongoing investigation.’

Mr Anderson was elected mayor of Liverpool in 2012, having been on the council since 1998.

The father-of-four was in the Merchant Navy and worked as a social worker before taking up the role.

He stood to become the Labour nomination for metro mayor of the Liverpool City Region in 2016 but was beaten by the then Walton MP Steve Rotheram, who currently holds the post.

A Liverpool City Council spokesperson said: ‘Liverpool City Council is co-operating with Merseyside Police in relation to its ongoing investigation. We do not comment on matters relating to individuals.’ 

In October, Mr Anderson revealed that his eldest brother Bill died after being admitted to intensive care with coronavirus aged 70.

Bill Anderson was a former chairman of the Merseyside Merchant Navy Association,.