Controversial ride-sharing service Uber is set to become legal in Western Australia, the State Government says.

Uber drivers will need to be licensed and will have to pay an annual fee and get police and medical clearances.

The government has been prosecuting Uber drivers for operating outside the law, but the service has been widely popular with the public.

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This comes as Uber and similar services were legalised in New South Wales, with the State Government offering a $250 million compensation to traditional cab drivers.

WA will become the third jurisdiction in Australia to legalise Uber, after the ACT and NSW.

A spokeswoman for WA Transport Minister Dean Nalder said he would make an official announcement later today to confirm Uber will be allowed to operate without fear of prosecution.

The decision has caught the taxi industry by surprise.

Taxi Industry Forum chief executive Howard Lance said there had not been any consultation about the decision and he first heard about it from the media.

“I am absolutely disgusted and somewhat mortified,” he said.

“We sort of half expected it, but I’m just blown away that he does this virtually a day after New South Wales did the same thing.”

‘End of the cab industry as we know it’

Mr Lance said some taxi drivers had paid hundreds of thousands of dollars for their plates to operate a taxi business and they needed to be compensated.

“Some of them have paid over $300,000,” he said.

“And when you start adding interest on it [the debt] it’s an awful amount of money they’ve forked out and these multi-nationals [Uber] have been given a free ride.”

Stephen Satchell, a former chairman of the Taxi Industry Council who has been driving a cab for 40 years, said the decision would leave many taxi drivers wondering if they have a future.

“I suppose it [the decision to licence Uber] stops the shenanigans, the cloak and the dagger stuff that we’ve had between the Minister, the department and the public,” he said.

“I would say to everyone that the devil is in the detail. There will be cheaper fares, I suppose they will tell us how great that’s going to be, but we are going to see how it pans out in the future.

“It’s sad. It’s the end of the cab industry as we basically know it.

“There will be stronger competition. The fares might be cheaper, might not. We’ll see where that pans out, but it’s a quantum change.

“This is something that many right wing thinkers out there in the business world things we need, we don’t, but let’s see where it takes us.”