The buses would link up in laser-guided “platoons” on busy streets, relieving congestion and more than halving current journey times. The system has aroused the interest of Transport for London and could be used to ferry athletes and spectators around the Olympic Park in Stratford in 2012.

The door-to-door service, known as Personalised Public Transport (PPT), is designed to attract car drivers who dislike walking to bus stops and having to squeeze on board with up to 140 other people. Each driverless bus would accommodate a maximum of 24 people but for an extra fee could also be ordered for exclusive use. The vehicles would cruise the streets like London black cabs but would be summoned by a mobile phone message.

The concept has been developed by the Royal College of Arts in association with a group of transport companies, including Michelin, the Centre for Automotive Industry Research and Capoco Design. Alan Ponsford, the project leader, said that the system was designed to retain the benefits of a personalised transport service without the congestion and pollution caused by private cars.

He accepted that the system would be expensive to install but said that the operating costs would be far smaller than for existing buses because paying drivers represents 60 per cent of the cost of running a bus. Fares on driverless buses would be similar to existing bus fares. They would follow magnetic markers in the road and would avoid other vehicles and pedestrians by using obstacle detection and collision avoidance systems. The electrically propelled vehicles would operate at a maximum of 25mph on residential streets but accelerate to 45mph on special lanes along major roads.

Mr Ponsford said: “With 12 people moving into London every hour and a population that is rapidly ageing, we need to find an alternative to the private car in cities. Within a decade the world will have 23 megacities of more than 10 million inhabitants. Making life tolerable in those cities is of paramount importance. The ideal place to showcase this idea would be the 2012 Olympics.”

The team behind PPT is holding discussions with potential commercial partners and plans to produce two prototype vehicles by 2007. The system would be trialled the following year. Toyota demonstrated a similar driverless public transport system at this year’s World Expo in Aichi, Japan.

Cardiff is among a group of European cities that is considering installing a monorail carrying driverless taxis. David Davies, the Conservative MP for Monmouth and Welsh Assembly member, recently condemned the proposal as a “pipe dream that could end up being the most expensive funfair ride this side of Walt Disney in Paris”.

Mr Ponsford said that the rising cost of fuel was making cars increasingly expensive and turning driverless buses into an attractive alternative.

“People may prefer to own their own car but if you can’t afford fuel there’s a pretty compelling case for switching,” he said. But he added that such a system would never completely replace the car. “Cars will survive but only for the dwindling proportion able to afford them. But everyone will have an alternative that offers the same A-to-B convenience.”

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