George Osborne performed a major u-turn by ditching his highly contentious plans to cut tax credits for millions of low paid workers.

The Chancellor last month announced he would bring forward measures to ease the transition to the new system after intense pressure from within Conservative ranks as well as the opposition benches.

But he used today's Autumn Statement and Spending Review to reveal he was dropping the £4.4 billion of planned cuts altogether.

Mr Osborne insisted he would still be able to deliver £12 billion in welfare cuts over the next five years while balancing the books by the end of the Parliament.

''I've had representations that these changes to tax credits should be phased in," Mr Osborne told the Commons to jubilant cheers from Tory backbenchers.

''I've listened to the concerns. I hear and understand them.

" And because I've been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether.''

Mr Osborne was forced to rethink the plans after peers blocked the move and a string of Tories spoke out publicly criticising the plans.

Treasury officials said cost of reversing the tax credits cuts was "more than off-set" by cuts to a "variety" of other benefits.

They include a cap on housing benefits for new tenants in the social sector from 2018 which will affect around 145,000 tenancies by 2021. Rules allowing housing claimants to continuing receiving payments when they are out of the country will be limited to four weeks instead of 13.

Mr Osborne was also forced to admit he will miss his own targets limiting government welfare spending.

The Chancellor announced the cap, which does not include basic state pension and some unemployment benefits, in the 2014 Budget but will breach it for the first three years of it coming into force.

The Treasury confirmed that there will be a cut from £5,000 to £2,500 in the amount of additional income a tax credit claimant can earn without losing benefits - known as the "income rise disregard".

The change is the only tax credit measure announced in the July Budget which has not been scrapped by the Chancellor.

At the time of the summer Budget, it was predicted to raise £170 million for the Treasury in 2016/17, rising to £250 million in 2018/19.