The forgotten money will be spent on council houses

Kevin Small, leader of the Labour opposition, which was in power when the fund was set up, said it was "pure fluke" the money was found.

The missing account was established in the 1980s, but subsequently fell into disuse.

The council told BBC News Online it did not know where the money came from originally.

I'm just bewildered. I don't know what to think William Potter Pensioner

But locals are angry at the missing thousands.

William Potter, a local campaigner and part of the Broad Street Area Committee, told BBC News Online: "I just don't know what the blazes is going on up there.

"As a pensioner, I have suffered recent council tax increases, and when you hear about this missing money, I'm just bewildered. I don't know what to think."

'Decent homes'

The account - whose exact contents are unknown, but thought to be up to �200,000 - was unearthed during a recent audit by a newly-appointed scrutiny committee.

The council has now added the cash to money it made selling council houses, and a grand total of �2.5m will be used to improve existing property, says the authority.

A spokesman for the council said: "We have a 30-year business plan for the 11,000 homes on our books which identifies how we will meet the investment needs of the government's decent homes standard by 2010.

"This will ensure the homes of our tenants are up to a high living standard."