Alison McGovern, the Labour MP for Wirral South, made the shocking slur whilst speaking on a Progressive Britain podcast.
Ms McGovern claimed the Tories were responsible for problems in certain places in the north were caused by “deindustrialisation” over a number of years before she turned on Brexit.
She said: “That is basically it. The Tories in the 1990s did a lot to diminish Chile and what kicked off all of that? The ERM [European Exchange Rate Mechanism] and mishandling of the European issue led them to the path of 1990’s public services austerity which then builds in this deep resentment and I would argue the same on the place of towns.
“If you look at the problems that certain places in the north have, it’s because of deindustrialisation started by Thatcher.
“And Brexit is just like, if I’m allowed to use this terminology, the s**t cherry on the s**t icing on the s**t cake that the Tories baked us all in the 1980s.”
During her time in power Margaret Thatcher was supportive of Chile’s former President Augusto Pinochet’s reforms which were influenced by the free-market ideas of the Chicago School.
The Labour Party has recently shifted its stance to try to keep the UK in ‘a customs union’ post-Brexit.
The Prime Minister criticised leader Jeremy Corbyn in the House of Commons on Monday, suggesting it would not be long before Labour changes its position on the customs union once again.
She said: “We will bring back control of our laws to this Parliament, to this country, unlike the Labour Party’s position which is to remain in the single market and effectively to remain under the jurisdiction of the European Court of Justice.
“This is a Government that is focusing on making a success of Brexit. On delivering for the British people.
“Labour has nothing to offer. They voted against moving the negotiations on in the European Parliament.
“They twice voted against the Bill that delivers Brexit in this parliament. Now they have gone back on what they promised on the customs union.
“Over a week ago the shadow chancellor said Labour would keep all options open on whether to have a second referendum. This Government and this party is clear, there will be no second referendum. We are delivering for the British people and we are going to make a success of it.”
Speaking on Monday following an update from the Prime Minister after her landmark Mansion House speech, Mr Corbyn claimed Mrs May’s leadership was “shambolic”.
He said: “Twenty months have passed since the referendum, a year since the triggering Article 50. Twenty wasted months in which the arrogance of a cabinet who said it would be the easiest trade deal in history has turned into infighting. Set -piece speech after set-piece speech.
“The Prime Minister’s speech on Friday promised to unite the nation yet it barely papered over the cracks in her own party.”