Britons will be forced to apply online for government services such as student loans, driving licences, passports and benefits under cost-cutting plans to be unveiled this week.

Officials say getting rid of all paper applications could save billions of pounds. They insist that vulnerable groups will be able to fill in forms digitally at their local post offices.

The plans are likely to infuriate millions of people. Around 27% of households still have no internet connection at home and six million people aged over 65 have never used the web.

Lord Oakeshott, a Liberal Democrat Treasury spokesman, said: "We must cut costs and boost post offices as much as we possibly can, but many millions of people – not just pensioners – are not online and never will be. They must never be made to feel the state treats them as second-class citizens."