as a fellow cheap arse (no offence) i got into this for as little as i had to spend.
my lathe (the smallest charnwood model, w815 i think) was £115 at the time, but its now had an upgrade and sells nearer £180, its not a bad lathe but its no the best, however having once used the smallest JET lathe, i can say that'd be a best bet, its a few notes more at around £200 but will last you a life time.
theres nothing wrong with 2nd hand too, im sure if you can find someone selling a decent lathe (or even a half decent) you'd get yourself a bargin, luckly most makes and models have common thread sizes, and adapters are easy to buy with chucks.
i started off with a chuck set from axminster, costing around £60, it has 4 sets of jaws, and a screw chuck, so you could turn small bowls, do spindle work and much smaller iteams, its not the worlds best chuck and jaw sets, but its a good starting point.
try not to cheap out on tools, however axminster are selling some under their own name, but they are infact made by a very well known shefield maker and having just purchased one of their tools have found it to be as good as tools that sell for 3 or 4 times as much, or you can buy a set of small turning tools made by crown from axminster for around £60, i started with them and i still use them daily!
and you'll need a roughing out gouge, but if you go with say the axminster ones, you'll have a beefy tool for under £15.
again staying with axminster you can purchase a good grinder with white wheel for around £40, infact i think they are now selling one with a slowspeed wet wheel, something normaly found on grinders costing £100+
so for around £315-£325 or less if you can get a lathe 2nd hand you'll have a basic set up to get her going.
however. please please please please buy a couple books on turning, eye protection (face sheild) and a good resportatior, you can get face sheilds for around £7 and resportatiors for £20+ both very important.
as for wood, i see your not far from brighton, this place is a good look around
http://www.woodrecycling.org.uk/
you can normaly find something thats ideal for turning, but the staff are often very helpful and more then happy to help, and you'll be able to find some nice wood for basicly pennys
hope this is of help.