Introduction of polymer £5 note in 2016 and Jane Austen £10 note in 2017 will end 320 years of paper money

Mark Carney, the governor of the Bank of England, has formally announced that Britain will switch to using plastic banknotes in 2016, ending 320 years of paper money.

After a public consultation in which 87% of the 13,000 respondents backed the new-style currency, the Bank said it would introduce "polymer" notes, as it prefers to call them, in two years' time, starting with the new £5 note featuring Winston Churchill in 2016 and the Jane Austen £10 a year later.

Speaking at a press conference in the Bank's Threadneedle Street headquarters, Carney said: "Our polymer notes will combine the best of progress and tradition. They will be more secure from counterfeiting and more resistant to damage while celebrating the history and tradition that is important both to the Bank and the nation as a whole."

The move follows Carney's native Canada, where plastic notes are being rolled out, and Australia, where they have been in circulation for more than two decades.

Carney launched a public consultation on polymer banknotes, seen as cleaner and more durable, shortly after arriving at the Bank this summer. However, the Bank's notes division has been considering plastic money for several years.

Bank officials have been touring shopping centres and business groups around the country with prototype notes to canvas public opinion.

The Bank has promoted its polymer notes, featuring a see-through window and other new security features, as less threadbare and tougher to counterfeit.

It has sought to quell concerns about the environmental impact of printing on plastic by suggesting they can last up to two-and-a-half times longer than the cotton-paper notes in circulation at the moment. The durability will also compensate for the higher production costs and save an estimated £100m, the Bank claims.

Its laboratory tests showed polymer banknotes only begin to shrink and melt at 120C, so they would fare better in washing machines but could be damaged by a hot iron.

Carney has also announced that the Bank will follow new procedures when selecting the historical characters to appear on future notes, to avoid the furore it faced earlier this year, when the announcement of the Churchill £5 note appeared to suggest that no women – other than the Queen – would feature on any denomination.

A new advisory committee, with a majority of independent members, will now suggest a theme – such as scientific achievement – and the public will be invited to suggest specific figures for inclusion. However, the governor will retain the final decision over which person is featured.

"These changes will ensure that the characters on our banknotes are fully representative of the history and diversity of this great nation, while having the necessary public respect and legitimacy."

The move is the latest in a long line of changes for banknotes, first issued in return for deposits by the Bank when it was first established in 1694 to raise money for William III's war against France.

Colour £5 notes replaced white ones in the 1950s; the first portrayal of a monarch came in 1960, when the Queen appeared on a new £1 note; and the introduction of historical figures such as William Shakespeare started in the 1970s.

As part of the preparation for this latest change, banknote officials have already been working with retailers and the operators of vending machines and cashpoints.

Link, which runs the UK cash machine network, said its machines would need new cassettes to hold the plastic notes, because they will be smaller, and not because of the change in material.

The 15% reduction in size for Churchill notes compared with the current Elizabeth Fry fiver brings English notes into line with sizes in other countries. But they will remain larger than existing euro notes and the different denominations of sterling will retain tiered sizes to help blind people differentiate between them.

The Bank concedes no note is counterfeit-proof but says copying the new polymer notes will be slower and more expensive.