The Chancellor has announced driverless cars will be allowed on Britain's motorways next year.

George Osborne said the vehicles could lead to the most "fundamental" change to transport since the invention of the petrol engine.

In a trial run, 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 move will be set out in next week's Budget, and the Chancellor argues it could boost the economy and put the country at the forefront of the new technology.

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. George Osborne, Chancellor of the Exchequer

George Osborne says driverless cars could boost UK jobs and productivity Credit: PA

Proposals removing 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% 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.