One of the founders of a proposed Labour-aligned lobby group says it will make some in the party uncomfortable but Labour cannot avoid the tough issues it is facing.

Josie Pagani, a former Labour Party candidate, confirmed she was involved in setting up a "think-tank" called Progress targeting Labour's right and centre.

Yesterday, the Politik website reported that the proposal caused ructions in Labour's caucus, although party leader Andrew Little said he was happy with it.

Ms Pagani said she and Porirua Mayor Nick Leggett had been working on the idea for some time and hoped to launch it at the end of the year. Its original title of True Labour was abandoned in favour of Progress after others in Labour objected.

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She said it was based on the Progress think-tank in Britain and would operate independently of the party, which she said would make it easier to reach out to business and Labour supporters who had walked away.

Labour's Napier MP, Stuart Nash, has been linked with the proposal and said he did support its goals as it was put to him. "I don't think it's a bad idea. It's not a faction, it's not anyone trying to undermine the party. It's to foster debate with a demographic Labour had lost over the past few years and needs to win back."

Ms Pagani said she could understand why it would make some uncomfortable but that was through the lens of the 1980s and 90s when factionalism was rife during the Rogernomics years. "They have to realise if you're talking about modernising the Labour Party, it is not a right- wing conspiracy."

Phil Goff, one of the remaining MPs from the Rogernomics era, said he did not know much about the think-tank.

"I think it's the Andrew Little think-tank that is probably going to be the most important here.

"I think Andrew has pretty clearly stamped the direction he wants to take the Labour Party, to embrace a much wider group and that means not going to the fringes but going to the centre of politics."