Every new cyclist saves £400

The savings, calculated for the first time, result from reduced costs to the NHS and employers through lower sickness rates and less congestion.

A 20 per cent increase in cycling would save more than £500million by 2012, said the report by Cycling England. An increase of 50 per cent would deliver savings of more than £1.3billion.

The government-funded organisation called for more investment to encourage people on to bicycles.

It said that if the Department for Transport put £70million a year into specific cycling programmes, this would:

Cut up to 54 million car journeys a year, mainly in congested areas such as inner London.

Prevent 35,000 tonnes of CO2 a year and improve air quality.

Cut the number of cars on the school run, a key cause of congestion in London, by at least five per cent.

Reverse the decline in the number of children cycling to school.

Cycling England chairman Phillip Darnton said: "The humble bicycle can play a significant role in tackling some of society's biggest problems - easing congestion, tackling traffic emissions and improving health.

"For the first time there is compelling evidence that sustained investment in cycling can make a substantial impact. Our investment case would reverse a generational decline in cycling. The question is one of will, ambition and vision."

The report called on the Government to give cycling a higher priority in official guidance to local authorities and to work more closely with organisations that promote it.

It said every child in England should get the chance to have training in Bikeability, today's equivalent of Cycling Proficiency, before they leave primary school.

Cycle England would fund "cycle czars" to work with every primary and secondary school in England within seven years.

It would also identify new, safe routes for children to use when cycling to school and build 600 new cycling "links" to schools.

The organisation calculated that every time someone converts to cycling £382 is saved as people reap the health benefits of the exercise.

A 20 per cent increase in cycling by 2012 would save £107 million in premature deaths among adults, £52million in costs to the NHS and £87 million in costs to employers through reduced sickness.

Savings produced by the cut in pollution would amount to £71 million a year, while those from reduced congestion would total £207 million.

At the moment, only 1.5 per cent of all journeys are made by bicycle, although there has been an 83 per cent rise in cycling in London since 2000, according to Transport for London.

TfL says it has increased its investment in cycling by 50 per cent from £24million in 2006/07 to £36million in 2007/08. Cycle England said that without new measures to combat car dependence, traffic will become 20 per cent higher than 2003 levels by 2015. This would create an extra 15 million tonnes of carbon dioxide.

Transport generates 27 per cent of greenhouse gases and transport emissions make up 70 per cent of air pollution in cities, said the report.

Between 14,000 and 24,000 hospital admissions a year are linked to poor air quality and road congestion costs the economy £20billion a year.

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