Driverless cars will be allowed on Britain’s motorways next year in a trial set to revolutionise motoring by 2020, George Osborne has announced.

Test drives will begin on a small number of local roads within months before pilots on motorways to assess safety are carried out in 2016.

The vehicles could lead to the most “fundamental” change to transport since the invention of the petrol engine, according to the Chancellor.

Mr Osborne said the move, which will be set out in next week’s Budget, could boost the economy and put the country at the forefront of the new technology.

He said: “At a time of great uncertainty in the global economy, Britain must take bold decisions now to ensure it leads the world when it comes to new technologies and infrastructure. That’s what my Budget next week will seek to do.

“Driverless cars could represent the most fundamental change to transport since the invention of the internal combustion engine. Naturally we need to ensure safety, and that’s what the trials we are introducing will test.

“If successful, we could see driverless cars available for sale and on Britain’s roads, boosting UK jobs and productivity.”

Proposals sweeping away regulations that prevent autonomous driving are expected to be brought forward this summer that would allow driverless cars to take to the roads by 2020.

Engineers suggest that driverless cars, which can alert drivers to accidents and traffic jams, could eventually prevent 95 per cent of crashes, according to the Treasury.

Trials on local roads are expected to be carried out in Bristol, Coventry and Milton Keynes, and Greenwich.

Tests will also be carried out of “truck platooning” on motorways, which would see lorries travel in a tightly-packed convoy that improves fuel consumption by reducing drag.

Mr Osborne announced £15m for a “connected corridor” between London and Dover that would allow vehicles to communicate wirelessly with infrastructure and surrounding vehicles and comparative fuel price signing is being introduced on the M5 between Bristol and Exeter.

Transport Secretary Patrick McLoughlin said: “Driverless vehicles have the potential to profoundly transform journeys by making travel a simpler experience for drivers, reducing accidents and helping traffic flow more smoothly.

“This work is further proof that the UK is leading the way for the testing of this new technology, which will also benefit our society and the wider economy by opening up new routes for global investment.” (The Guardian of London)

•Photo shows the inside of one of the driverless cars.