Pressure: David Cameron has been criticised for allowing civil servants to speak out ahead of the EU referendum

David Cameron faces his first backbench rebellion over moves to allow unlimited public funds to be spent pushing the Yes campaign in the EU referendum.

Ministers have ditched rules which limit the involvement of central and local government and the European Commission in the run up to polling.

It frees the way for the entire government machine – and the Commission – to churn out pro-EU messages throughout the final 28 days of the campaign if, as expected, the PM endorses a Yes vote.

The elections watchdog said it was ‘disappointed and concerned’ by the decision to scrap long-standing rules used in previous referendums to stop public funds going on political campaigning.

The EU Referendum Bill, which will come before MPs tomorrow, also removes the 28-day ‘purdah’ period seen in last year’s vote on Scottish independence and the 2011 referendum on the voting system.

Eurosceptic Tories last night demanded ministers should think again, threatening Mr Cameron with his first Commons revolt if he does not change course.

Rebels are expected to table amendments to restore the purdah period – leaving the Government, which has a majority of only 12, relying on Labour to quell the rebellion.

Former Cabinet Minister Owen Paterson said: ‘I would like the Government to recognise this is wrong and amend their own Bill.’

Anger: Tory MPs say that the EU will be free to pump out pro-Europe propaganda in the run-up to the vote

Steve Baker, chairman of the Eurosceptic group Conservatives For Britain, said: ‘The idea that the Government can spend unlimited amounts of public money on this campaign is absurd and in any other election it would be unlawful.

‘There is a clear difference between ministers campaigning and entire government departments actively pushing for this. I would like the Government to amend the law without a great fuss and drama. It may be this was the result of a bit of overzealous drafting.’

In a damning assessment of the Bill, the Electoral Commission said it could mean governments and others being ‘free to spend unlimited amounts of public funds promoting an outcome at the referendum right up until polling day’.

Pointing to the restrictions in place in the AV and Scottish votes, it said there was a need to ‘improve the effectiveness of controls on the activities of governments in the lead up to a referendum poll’.

Campaign: Owen Paterson, left, and Steve Baker, right, are spearheading a new Conservative group which is likely to call for an EU exit

'Fixable': Foreign Secretary Philip Hammond insisted that Britain does not need to leave the EU

It added: ‘We are therefore disappointed and concerned that the Bill includes provision to remove the restrictions on the use of public funds by governments and others to promote an outcome right up until voters cast their vote.’

Foreign Secretary Philip Hammond said there would be guidelines to stop public money being spent ‘inappropriately’. He told BBC1’s Andrew Marr show: ‘The Government is clear it doesn’t want to be neutral on this. We hope to be able to achieve a package we can recommend to the British people.

‘The Government wants to be able to engage in the debate but of course it wants to do it in a fair way.’