Chancellor George Osborne's economic plans lay in tatters after a leading right-wing think tank said yesterday that his cuts were not working.

The Institute for Fiscal Studies (IFS) said that predicted "savings" of £19 billion through welfare cuts had in fact reduced spending on welfare by just £2.5bn.

Some areas of spending, such as housing benefit, have increased by hundreds of millions as people are forced to rent from private landlords who are pushing up rents.

But one success for Mr Osborne was the transfer of money from the poor to the wealthy.

And tax-evading businesses are getting away with more billions as his public service cuts see tax inspectors sacked and tax offices shut down across the country.

These findings come as a further headache for Mr Osborne as he prepares next month's autumn statement amid fears that the worsening international economic outlook will add to the strain on Britain's beleaguered public finances.

The IFS said that pensioner benefits had increased by £5bn partly as a result of the ageing population.

Despite cuts to housing benefit that were expected to produce annual savings of £2bn, spending is now likely to be £1bn higher - a rise which the IFS said was "unanticipated" as lack of social housing drove people into the arms of greedy private landlords.

Low wages also meant more spending on tax credits and less income tax paid in.

Economist and Tax Research UK director Richard Murphy said that government estimates of £35bn lost in uncollected business taxes were far too low and that a closer estimate would be £119bn.

He claimed that if a company did not send in a tax return then its tax debts were simply excluded from the estimate - and major tax avoiders such as Google, Starbucks and Amazon were excluded.

The Campaign for Public Ownership's Neil Clark said that privatisation was also costing the taxpayer and the Exchequer dearly.

"The railways now receive four times more government money than they did under British Rail," he said.

"We have argued for a long time that public ownership saves the taxpayer a lot of money."