O'Halloran defected to the SDP in September 1981, as did both of the other Islington MPs. However the Boundary Commission cut the number of constituencies in Islington from three to two. O'Halloran sought selection as the SDP candidate for the revised Islington North constituency but the local SDP association selected John Grant, then-SDP (elected as Labour) MP for Islington Central, as their official candidate. In February 1983, O'Halloran resigned his membership of the SDP and sat in Parliament as an "Independent Labour" member, supporting the Parliamentary Labour Party. Despite this, he failed to regain the Labour Party nomination for the 1983 general election and he was defeated by the new Labour candidate, Jeremy Corbyn, and finished in fourth place with 11.1% of the vote.