The government has given its tacit support to the controversial £21 billion merger of the London Stock Exchange and Deutsche Börse, saying that the Bank of England did not have the legal authority to block the deal on the basis of national interest.

Simon Kirby, economic secretary to the Treasury, told MPs yesterday that while the tie-up of Europe’s two largest exchanges was a “significant development” there was no role for the government to scrutinise the merger and that European law barred the Bank from putting a stop to it.

His comments came as Sir William Cash MP told the Commons that officials should veto the LSE’s deal with its Frankfurt-based rival.

“It’s a slam dunk that the merger is not in the national interest,” said Sir William, who argued that under the 1946 Bank of England Act the Treasury could order the central bank to block the deal.

However, Mr Kirby said that while the Act did give the government the power to intervene, the law had been superseded by European regulations that limited the Bank’s ability to intervene. “The government does not have a formal role in scrutinising this merger . . . but we are following it closely and we are in touch with regulators,” Mr Kirby said.