Lord Alton, who as Liberal MP for Liverpool Edge Hill, made a speech in the House of Commons predicting the riots, recalls they created "a sort of caricature" for the city.
Led by then then Secretary of State for the Environment, Michael Heseltine, who became unofficial minister for Merseyside, Margaret Thatcher's government embarked on a programme of redevelopment and investment.
How successful that programme was has been questioned ever since, by those who feel that beyond the dockland area little has changed in 30 years.
'A city renaissance'
Looking back Lord Heseltine believes the problems of Liverpool in 1981 were less about a lack of money and more that the city was "leaderless" and everybody "blamed somebody else".
In the long run, a few houses were built and some bits and pieces, but in real terms there's been little change
Wally Brown, Chair of Toxteth Community Relations Council in 1981
He said: "There wasn't anybody who was prepared to say 'follow me'.
"There should have been local people and local initiatives."
Following the riots, the Merseyside Development Corporation reclaimed 200 acres of Liverpool's dockland for housing and commercial development and another 200 acres for recreation and public space.
The Albert dock, the largest group of Grade I listed buildings in the country, was restored as a residential and retail development and in 1988 the Tate gallery opened a northern base there.
In 1984 the Liverpool International Garden Festival was held on what had been a refuse tip in the south docks area.
The impact of this was short-lived, and a long term use for the site was not found until recently.
In the 1990s the city would benefit from two tranches of European Objective One funding, and in 2004 it was awarded the 2008 European Capital of Culture title.
The Liverpool One development has transformed the city centre, as has the building of the new Museum of Liverpool and a waterfront arena and conference centre.
Garden Festival
Image caption
The 1984 International Garden Festival was held on Liverpool's waterfront
Venture beyond the city centre however and many feel the investment has not reached the root of the problems which caused the riots.
Wally Brown, Chair of the Community Relations Council in Toxteth in 1981, said: "I've always been very sceptical about what Heseltine did.
"The riots took place in Toxteth, but they made him Minister for Merseyside. That includes places as far away as St Helens and that isn't going to bring any resources in to Toxteth.
"In a sense he tacked round the edges but if you look at the issues in Toxteth at the moment it's actually worse than it was at that particular time.
"In the long run, a few houses were built and some bits and pieces, but in real terms there's been little change.
"It's still the same for people who live there."
Delroy Burris, Merseyside Community Race Relations Officer for Liverpool 8 in 1981, said: "The attitude of the government towards Merseyside was the same attitude that every Liberal or Labour councillor in the city had towards Liverpool 8, which was to let it rot and decline.
"The police had a siege mentality towards Liverpool 8. It was a mixture of racism, prejudice and ignorance.
"There are less of the original community living there now.
"The area is improving, but for all the houses that are now being built, none of the locals are involved in building them."
'The right mindset'
One of the criticisms local communities levelled at the work initiated by Michael Heseltine was that it amounted to little more than the planting of trees.
"It was an awful lot more than just trees," Lord Alton argues.
"When Michael Heseltine recently came to give a Liverpool John Moore's University Roscoe Lecture he was given an extraordinary reception by the audience
Lord Alton
"When you look at the fantastic landscape along the waterfront now and think about the achievements that have been made, it's very different, it's a World Heritage site.
"When Michael Heseltine recently came to give a Liverpool John Moore's University Roscoe Lecture he was given an extraordinary reception by the audience.
"They knew he had acted positively in the situation.
"It's not about party politics, it's about a mindset and his mindset was the right one."
Lord Heseltine acknowledges that ultimately the regeneration did not touch all areas of the city.
"You never achieve all you want," he said.
"David Cameron asked Sir Terence Leahy and myself to do a report on Merseyside recently and the transformation that has taken place is hugely encouraging.
"Is it as far as it can go? Of course it isn't. I hope Liverpool will continue to go from strength to strength.
"I'd love to pretend you can do it quicker but it does take a significant amount of time.
"But when the tide turns, which it has for Liverpool, then you have to catch it.