Moshe Silman, a former small businessman who has since fallen on dire financial circumstances, was said to have second- and third-degree burns on more than 90 per cent of his body after dousing his clothes with petrol and starting to immolate himself.

Mr Silman, who in a 265-word note he had written earlier blamed the Israeli government for having "robbed me" was shown in harrowing television footage on fire at the rally in Tel Aviv on Saturday night while demonstrators tried to put the flames out amid audible shouts of "medic" and "bring water quickly."

As politicians joined in expressing shock at the incident, Benjamin Netanyahu, Israel's Prime Minister, described it as a "great and personal tragedy" and asked the welfare and housing ministers to investigate Mr Silman's complaints of serial rejection by state agencies and the courts.

In his note, which was later read out by protesters, Mr Silman said: "The State of Israel has stolen from me and robbed me, left me with nothing. Two committees from the Ministry of Housing have rejected me, despite the fact that I have undergone a stroke and was granted 100 per cent work disability…

"I blame the State of Israel. I blame Bibi Netanyahu and [the country's Minister of Finance] Yuval Steinitz, both scum, for the humiliation that disenfranchised citizens go through day in and day out, that take from the poor and give to the rich."

Mr Silman, who lives in Haifa and was a participant in earlier demonstrations, levelled some of his most stringent complaints at the state National Insurance Institute and declared: "I have no money for medicine or rent… I won't be homeless and that is why I am protesting against all the wrongs the state imposes on people like me."

One eyewitness told the online news service Ynet: "We saw him leaving a house entrance holding a burning object in one hand and a can with flammable liquid on the other. He started pouring the stuff over himself and immediately set himself on fire, everyone poured water over him."

Idi Lev, of Rabbis for Human Rights, which had sought to help Mr Silman, told Ynet that the state had pushed him "over the edge", foreclosing his home, seizing his late mother's apartment and denying him rent support because he had once owned a flat.

The lease of the friend's apartment where had been living for free expires in a week "and he did not want to live on the street again. Wherever we turned, no one was willing to help."

The otherwise peaceful Tel Aviv rally was the biggest of several in Israel on Saturday, the anniversary of the start of last summer's social demonstrations when young people pitched a protest tent in the city's Rothschild Boulevard in support of a demand for more affordable housing.

Mr Netanyahu subsequently set up a committee under a prominent economics professor, Manuel Trajtenberg, and said the government would adopt many of its recommendations on more affordable housing, better employment opportunities, free nursery education, and easing of import of tariffs to reduce consumer prices.

But organisers of this summer's protests, among some others, have argued that the government has not gone nearly far enough to improve welfare services and ease economic inequality.

The Labour leader of the opposition, Sheli Yachimovich, said that the "brutal toughening of criteria for public housing and the lack of a public safety net have brought many like Moshe to a dead end and desperation."

But she added that while "we are all praying for him… suicide is a dreadful, extreme act. "He should not serve as an example, or a symbol of social justice protest," she said.