The European Commission has spent £2.4 million on Project Veronica, a study on how the boxes would work. The boxes, known as an Event Data Recorders (EDR), could monitor vehicles' speed and the actions of the driver - when and how often the brakes, indicators and horn were applied.
Supporters say they could be used to reconstruct what happened in the event of a commission which would make it easier for insurance companies to decide who was at fault and, where necessary, enable police to take action against the driver.
It would also check whether built-in safety devices functioned properly.
However, the proposals are likely to trigger concern among civil liberties groups over the growth of the surveillance state.
Simon Davies, of Privacy International, warned that in future, such a system could be combined with other technology to keep a constant eye on motorists' every movement.
"If you correlate car tracking data with mobile phone data, which can also track people, there is the potential for an almost infallible surveillance system," he said
However such concerns have been dismissed in the Project Veronica report.
"Anonymised EDR data would be of very limited use in the judicial process and in that regard there is no obvious reason for which data privacy rights should supersede public order and crime investigation," it notes.
The EDR would be triggered by a sudden change to the car's speed - such as abrupt braking. It would record the events 30 seconds before a crash and 15 seconds afterwards, with the information being downloaded by the police or at special workshops.
The use of black boxes would, the report adds: "Help explain the causes of accidents, will make motorists more responsible, speed up court proceedings following accidents, lower the cost of court proceedings and enable more effective prevention measures to be taken."
These black boxes could also be used by car-hire companies to both to sue a motorist who was at fault in the event of an crash and, according to the report, to compile a "black list of drivers" who are involved in accidents but do not report them
Black boxes are already installed in a number of vehicles, including 3,500 Metropolitan Police cars.
But there is likely to be consumer resistance at plans to put the boxes, which could cost up to £500 each, into every vehicle.
Norwich Union tried installing black boxes as part of its pay as you drive insurance policy, but eventually abandoned the project.
Dylan Sharpe, campaign director for Big Brother Watch, said: “These boxes are yet another means of surveillance that will give anyone with the means to decode them the ability to find out exactly where you have been.
“It starts with the police and insurance companies and ends with vicious employers and jealous partners watching your journeys.”
An AA spokesman voiced misgivings about the EU proposals. "In reality, police investigators are already able to get much of this information from existing engine management systems, if they need it after a crash.
"It would be a mammoth task to fit these boxes to more than 30 million cars. The only possibility would be if they are installed at the factory.
"We also have issues about their reliability and an individual's ability to challenge the accuracy of the information in court."
But Robert Gifford, executive director of the Parliamentary Advisory Council for Transport Safety backed the proposals.
"They would help a driver prove his or her innocence if neccessary and would help researchers understand better what causes crashes."
An EU spokesman said that the any decision on whether and how to adopt the technology would be left to member states. "There is no question of standardisation or compulsion.
"We are co-financing this project because we want to help member states promote road safety. This study has no significance at the moment."
A Department for Transport spokesman was also unenthusiastic about the use of black boxes.
"We are looking at this report on Event Data Recorders. However, the technology raises serious privacy and legal issues and we have no plans to introduce these devices," he said.
"We have cut the number of people killed and seriously injured on Britain's roads by 40% since the mid 1990s - that means 19,000 fewer deaths and serious injuries each year – and are continuing to improve safety through our award-winning THINK! campaigns, measures to create safer vehicles and tougher laws to tackle dangerous drivers."
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