Benefits need to be hiked by twice as much as planned this spring in order to protect millions of the poorest in society from the impact of surging inflation, a respected economic think tank has argued.

In April, payments including the jobseekers’ allowance, working tax credits and disability benefits are due to rise by 3.1% – in line with the inflation rate recorded last September.

But cost of living pressures have surged since then and the consumer price rise measure is expected to hit 6% by the spring, largely thanks to soaring energy bills.

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The Institute for Fiscal Studies (IFS) said increasing benefits by 6% instead of 3.1% would cost an extra £3bn.

But it would save ten million households from facing a £290 real terms year-on-year fall in benefit income, it calculated.

Other measures to mitigate an expected £14bn surge in energy bills across the UK would either be very expensive or provide very partial compensation, the IFS argued.

Abolishing VAT on domestic energy, at a cost of £2.4bn, would on average give households back less than a fifth of the annual rise in their energy costs, the think tank said.

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It would also further encourage people to spend their money on energy rather than other goods or services that are subject to tax – an undesirable outcome given the environmental impact.

Robert Joyce, deputy director of the IFS, said: “The way in which we increase benefits each April is not fit for the period of high and rising inflation we now face.

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“By April inflation will be about 6%. So the poorest are heading for a 3% year-on-year cut in their real benefit levels and living standards.

“It would be preferable to raise benefits by the actual inflation rate in April. If that is 6% it would cost an additional £3bn, or £4.5bn if the state pension were included.

“Doing so would compensate benefit recipients on average for higher costs, including energy costs.

“This need not be a permanent increase. Future uprating can be adjusted once inflation has fallen back.”

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