After scores of Commonwealth nations boycotted the games in protest over apartheid in South Africa the competition faced a major funding crisis and was in danger of falling through.
Mr Maxwell, the owner of the Daily Mirror, stepped in to take on the “onerous task” of rescuing it, promising to raise private contributions and put in his own cash.
But with a shortfall of millions, he repeatedly asked the government to help plug the funding gap.
Despite his cajoling, pleading and threats that the games could face the “national humiliation” of having to be cancelled, the prime minister stood firm and refused to pay a penny.
Mr Maxwell so admired Mrs Thatcher’s obduracy that he eventually wrote to her to say he respected the way she “stuck to her guns”, promising a £2 million loan so small businesses could be paid and the games wound up with “dignity”.
The government had declared as far back as 1979 that taxpayers’ money would be off limits for the Commonwealth Games, with funding having to come from sponsors. But with Britain increasingly seen as a “friend” to South African apartheid because of its opposition to economic sanctions, 32 of the 59 eligible countries boycotted the competition. Sponsors pulled out, leaving just £4 million raised of the expected £12 million cost.