Liverpool were closing in on a deal for Alli when he was at MK Dons.
But instead he ended up at Tottenham for a bargain £5m after the Kop club KO'd a deal.
He was going to Liverpool you know, it was absolutely all done and sorted but Liverpool had a change of heart the next day. It was a change a heart over money rather than the actual boy," he told You Are The Ref's The Ref Show.
“They are regretting it every single minute of every single day. He's a player isn't he, as in he's one of those lucky lads who can be anything that he wants to be but he also has that little bit of edge about him."
Lawrenson added: “The other thing as well is Tottenham have a transfer committee and I know one of the guys on it and when they went to buy him only three of the five said yes, when I say only of course only three was enough.
“I saw him at Preston a few times against MK Dons and he pretty much just ran the game."