An estimated £4 billion held in accounts that have not been used for three years or more could be redistributed, to the dismay of the banks.

They and the Treasury are in talks over the treatment of accounts that customers appear to have forgotten. Mr Brown wants the “forgotten” money to be paid out to charities. The banks believe that accounts should not be treated as dormant until they have been inactive for more than ten years.

Ivan Lewis, the Economic Secretary to the Treasury, issued a veiled warning to the banks this week. “We hope to reach agreement, but if we can’t we will still act on our manifesto pledge by the autumn,” he said.

A Treasury spokesman said: “We set out our position on this in the Budget. As this said, we are currently engaged in constructive discussions with the industry. These discussions are ongoing. No conclusions have been reached.”

Mr Brown’s plans to redirect billions of pounds in dormant accounts to charities come after a similar initiative in the Irish Republic, where more than £100 million in cash from dormant accounts is being used for charities. However, in Ireland dormant accounts are those that have inactive for 15 years or more.

A meeting to hammer out the final details of the agreement was cancelled last month and is now expected to be held next month. Despite cancelling the meeting, the Treasury wants to reach agreement with the banking industry in time for the Pre-Budget Report in October or November.

The Government’s interest in dormant accounts was heightened this year when it emerged that some of the banks had been flattering their profits by using the money held in them.

Under the original plans drawn up by the Government, the cash from such accounts would be put into a special fund that would pay out to specific charities.

However, Britain’s banks complained that such a fund would carry administration costs that would have to be paid for from the dormant accounts.

Now the Treasury is believed to be prepared to allow the banks to pay out the money directly to their favoured charities. The banks already pay out £140 million to charity.

The dormant account scheme will also include safeguards for those people who find that their money has been paid out. A central register carrying the names of people with dormant accounts is to be set up, and banking customers will be able to claim their money back. Any losses sustained as a result are expected to be covered by an insurance policy.

The Building Societies Association, whose members are to be included in the scheme, has protested about the Government’s plans. It says that the money does not belong to the banks or the Treasury: it belongs to the customer.

Consumers are also against the three-year dormancy definition. According to the Unclaimed Assets Register, an organisation that helps to trace the owners of unclaimed assets, more than 81 per cent of the public want the definition of dormancy to be ten years.

In total, more than 1,500 people were surveyed, of whom 36.1 per cent said that there should be ten years of inactivity before the money is transferred to charities; 10.4 per cent felt it should be after 15 years; and 34.9 per cent felt that the period of inactivity should be more than 15 years. Only 18.7 per cent felt that it should be available to charities sooner, in five years or less.

Keith Hollender, managing director of the Unclaimed Assets Register, said: “In most cases money is unclaimed because the owners have failed to advise of any house moves and subsequently forgot their entitlements, or have passed away. However, the greatest surprise came when nearly half of those who took part in the survey revealed that they might actually have accounts somewhere that they had not accessed in years. A staggering 42.3 per cent admitted that they might be contributing to the unclaimed money mountain.”

He added: “The Government has already indicated the need for a national register to provide individuals with a means to find funds, even if these have been transferred to a third party.”

LOW INTEREST

• All banks and building societies to be included
  
  
• Savings and current accounts to be affected
  
  
• Government defining dormant accounts as those that have been inactive for three years
  
  
• Banks want the limit to be ten years
  
  
• Customers will be able to claim money back, even if accounts are closed
  
  
• Full plans to announced in the Autumn Statement

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