Dean streaks into lead as campaign funds pour in

Howard Dean, the emerging juggernaut of the Democratic presidential race, has thrown down an intimidating challenge to his rivals by deciding to forgo public financing in his quest for the nomination to take on President George Bush.

Mr Dean's announcement comes days before he will receive the formal endorsement of two of the country's most powerful labour unions, a key party constituency which had been seen as a preserve of another leading candidate, the Democratic former Houseleader, Dick Gephardt.

The two developments give the former Vermont governor a material and psychological advantage in a previously crowded and muddled contest. Joe Trippi, Mr Dean's campaign manager, said: "We feel we're really well positioned now to take it."

Mr Dean, a rank outsider at the start of 2003, now leads the nine-strong field in the polls nationally, as well as in the key first primary of New Hampshire. He is also tied with Mr Gephardt in Iowa, whose caucuses kick off the election season in 10 weeks time.

Mr Dean is rejecting the $45m (£27m) ceiling for primary spending under campaign rules, as well as up to $18m (£11m) of federal matching funds. The former governor, who has run an unprecedented internet-based fund-raising operation, calculates that he can raise more than $63m (£38m) under his own steam. This is the only way, he argues, to take on Mr Bush who, as in 2000, has opted out of the federal limits.

The President is unchallenged in the primaries yet he has already amassed a $100m (£60m) war chest and will have raised double that sum by the time the general election campaign begins in earnest next September. Mr Dean's main challengers must decide to either do the same, or tacitly admit that they are not in the same league on fund-raising - a barometer of popularity where success creates its own momentum for a candidate. General Wesley Clark, second in the national polls, and John Kerry, the Masachusetts senator, have indicated they will follow suit. But the others say they will abide by the existing rules.

Mr Gephardt accused the former Vermont governor of seeking "personal and opportunistic advantage". Analysts say that if both major party candidates opt out of spending constraints, it may be, in effect, the end of the campaign finance system, introduced in the wake of the Watergate scandal.

This week, Mr Dean will formally receive endorsements from the American Federation of State, County and Municipal Employees (AFSCME) and the Service Employees International Union (SEIU).

The two organisations have more than three million members and millions of dollars to spend on the elections. In New Hampshire and other important primary states, their "get out the voters" operation will be working for Mr Dean.

The funding decision and the endorsements have overshadowed what might otherwise have been a serious blunder by the candidate. Mr Dean said that he wanted to be the candidate of Southern voters "with Confederate flags in their pick-up trucks." That furore has died down amid speculation that Mr Dean may win Iowa and New Hampshire and have enough money to squash any competitor who emerges.

Many Democrat leaders, believe Mr Dean's roughhewn style and tendency to shoot from the hip would make him an easy target for Karl Rove and his White House strategy team. "He's not ready for prime time," one Democratic adviser said, who believes that Mr Dean, a vehement opponent of the Iraq war and Mr Bush's tax cuts, would be painted a pacifist, high tax "liberal" headed for a landslide defeat to match those of George McGovern and Walter Mondale in 1972 and 1984.