Wednesday’s Budget will include plans to make the UK the best place to manufacture and road-test driverless cars, the chancellor has said.
Writing in the Sun newspaper, Mr Hammond said investment in “exciting new technologies”, including in driverless cars, will be announced.
This will “prepare the ground” for the cars to be on UK roads by 2021, he said.
Mr Hammond said the “inventors dream” will soon become a reality.
The technology that allows cars to become more autonomous has been increasing in recent years, with all the main manufacturers now offering some element of driverless technology, including self-parking features and cruise control on motorways.
The announcement comes after the UK’s biggest car manufacturer, Jaguar Land Rover, began testing driverless cars on public roads.
The trials, which rely on sensors that allow the cars to detect traffic, pedestrians and signals, took place in Coventry city centre over several weeks.
Jaguar said a human was on board to react to emergencies.
In his article Mr Hammond said: “Take driverless cars. This was once just an inventors dream, but it will soon become a reality.
“We can stand by and watch this happen, or we can embrace it and take full advantage of what is in front of us.
“My Budget will include plans to make Britain a world leader in this area – the best place for developers to make and road test prototype vehicles.”
He said the industry could be worth £28bn to the UK economy by 2035, and could create tens of thousands of new jobs.
Mr Hammond also said the government will set up a National Retraining Scheme with the Confederation of British Industry and the Trades Union Congress to retrain people.
He added that money will also be invested in construction training programmes to ensure there are enough construction workers to build homes.