THE Government has waved through the planned £29bn merger between the Halifax and Bank of Scotland.

Trade Secretary Patricia Hewitt said she would not refer the proposed merger to the Competition Commission for an investigation.

Mrs Hewitt made her decision following advice from the Director General of Fair Trading (DGFT).

Mrs Hewitt said: "I have considered the DGFT's advice carefully and agree that the merger will not raise competition concerns in the banking sector that would warrant a reference to the Competition Commission.

"The market shares which would result would be much lower than those of the four main clearing banks. The parties' branch networks are, to a large extent, complementary and there is very little geographic overlap."

The move comes a week after the Government blocked Lloyds TSB's £18bn takeover bid for rival Abbey National, saying the deal would be against the public interest.

Shareholder approval for the merger will be sought from both banks next week at extraordinary general meetings.

Bank of Scotland will hold its extraordinary general meeting in Edinburgh on Tuesday, while Halifax's will be the following day, in Sheffield.

The deal will then need court approval in England and Scotland, expected next month. The merger is expected to be completed on September 10.

In a combined statement, Bank of Scotland and the Halifax said: "This combination is focused on increasing competition by the creation of a fifth force in UK banking, something which is good news for consumers.

"Our proposals to merge Bank of Scotland and Halifax have been well received by our proprietors, employees, customers and the markets and they will all be further encouraged by this announcement.

"We now look forward to the EGMs for Bank of Scotland and Halifax on July 24 and 25 respectively, where both banks will seek the approval of their shareholders in the next stage of the merger process."