For the first time in its history, the Museum of London (MoL) has been given the go ahead to operate beyond its current boundary, the City of London.

An amendment to the Museum of London Act 1965, passed by parliament in July, allows the museum to work across the whole of London. The draft order for regulatory reform was placed before both houses of parliament specifically to enable the museum to merge with the Museum in Docklands.

Jack Lohman, the director of the MoL, described it as a 'get out of jail order'. He said: 'I am thrilled. What this means is that the Museum of London can work outside of the square mile.' The MoL is the hub leader for London and Lohman added: 'The hub's role is to interact with the whole of London. It [the order] allows us this potential.'

The aim of the merger is to keep the struggling Museum in Docklands afloat by amalgamating boards and some staffing costs. The MoL calculated that the merger would save £1m up to 2005/6. Its request for reform was sent to the Department for Culture, Media and Sport (DCMS), which then sent it to the Regulatory Reform Committee (RRC). The RRC returned a unanimous vote for recommendation to parliament.

But during parliament's consideration, DCMS told the RRC that the figures submitted were wrong and instead of the original calculation, the savings would be less than £120,000 in 2005/6. The RRC made a special report to inform Parliament of the new information, although its decision to recommend the reform was unchanged.

Lohman said: 'After a year of running the Museum in Docklands we looked back and maybe we were too ambitious with the savings forecasted. We cannot run the museum without a director. We are now more realistic. We had to look at a different model of management. We need to do so much fundraising to ensure its [Museum in Docklands] survival and success.'

David Spence, from the National Maritime Museum, London, became the director of the Museum in Docklands last month, and a full-time fundraiser has also been recruited.