eBay is your friend for this one, iPhones 2g's are definitely available for under that price, although some seem to be collector's editions and are selling for several thousand pounds which makes me wish I had kept mine now!
You may also be able to get one from places like Craigslist, Gumtree, or your local paper. I would look in charity shops and even phone repair shops - if you ask in there, they may know someone who has one and is willing to sell.
My local indoor market has a stall on which they repair phones and also sell second hand ones, this sort of place may be worth checking out.
Obviously with the new iPhone 6 and 6 plus being released, you may pick up a more recent iPhone at the right price too.
My advice would be to consider the iPhone 4s if you want to cut costs but also use the latest software, as the iPhone 4s is the oldest model that does still support iOS8.