A lobby group co-founded by likely contender Lord Bassam has loaned £2,000 to campaigners fighting for a yes vote in the Brighton and Hove mayor referendum.

The city is the first place where the New Local Government Network, which has New Labour leanings, has helped fund a yes campaign in the run-up to October's referendum over a directly-elected mayor.

The interest-free loan will boost the efforts of pressure group Yes For A City Mayor.

Lord Bassam is likely to be among the front runners for the Labour nomination for mayor if voters back the new system.

Opponents of a directly elected mayor from the cross-party Allies for Democracy group claimed today the network's involvement meant the run-up to the referendum would be a David and Goliath battle.

But bus company managing director Roger French, who is heading the Yes campaign, said funding was a side issue and the group's main backers would be from Brighton and Hove.

He said: "Funding is irrelevant. We are about showing people they have a democratic right to elect a leader.

"I think we are getting support from all sections of the community and I think that is what is important."

A spokesman for the network - set up by Lord Bassam and three others in 1996 as a think tank and lobby group dedicated to local government reform - said yes campaigners in Brighton and Hove had been the first to ask for support.

He said the network supported pro-mayoral organisations that were politically non-aligned and the loan was intended to provide "seedcorn funding" rather than the bulk of campaign funds.

The network has agreed to support a similar campaign in the London borough of Lewisham since agreeing to the Brighton and Hove loan.

Simon Fanshawe, who chaired the successful campaign for city status and is tipped to be among candidates for the Labour mayoral nomination, was among the senior figures in Yes For A City Mayor who asked the network for support.

The network's members include Lord Bassam, Brighton and Hove City Council leader Ken Bodfish, cabinet councillor Sue John and Labour MPs Ivor Caplin and David Lepper.

Among city council officers, Jenny Rowlands, lead officer responsible for the authority's local government reform proposals, is listed as a member.

Lord Bassam and Ken Bodfish, together with Mr Fanshawe, are considered the only serious runners to become Labour's candidate for mayor.

Labour dissident Francis Tonks, campaign organiser of the Allies for Democracy, said: "All the big money is on the side of the mayoral campaign.

"We have got people who will work their butts off to stop what I see as an elected dictatorship but I think it is very much a David and Goliath struggle."

His organisation has already been given £500 by the Brighton and Hove branch of the trade union UNISON to fight for a no vote in the referendum.

Tory councillor Garry Peltzer Dunn, a fellow member of Allies for Democracy, said the No campaign, which was supported by members of all four parties on the council, did not have access to large sums of money.

He said: "Vested interests seem to be ensuring money is available to protect vested interests."