FEARS of a devastating dunk into deflation were raised yesterday when new official figures showed the benchmark CPI rate stuck at 0 per cent for the second month in a row.

Chancellor George Osborne praised the figures as a sign that his economic plan is working.

But TUC general secretary Frances O’Grady called it “a mark of the weak condition the economy has been left in by a failed economic plan.

“Stagnating prices are not a sound foundation for the strong and sustained pay rises that workers have been waiting years for.

“With the threat of deflation set to continue, the Conservatives’ plans for extreme cuts after the election look more and more like a suicide note for the economy.”

Economist Ann Pettifor warned that as deflation bites and prices drop, the relative burden of debt would increase, hitting anyone who needs to borrow.

“This includes businesses who need to make improvements to their firms and anyone who needs an overdraft, student loan or mortgage.

“Deflation is a particularly big threat to households that have had to borrow large mortgages to afford a decent home.”

Labour shadow chief secretary to the Treasury Chris Leslie pointed out that wages “continue to be sluggish” and are down £1,600 a year on average since 2010 with tax and benefit changes leaving families £1,000 a year worse off on average.

The headline CPI rate of 0 per cent remains the lowest since comparable records kept by the Office for National Statistics began in 1989.

The Bank of England has said it expects deflation to set in at some stage in the coming months.

By Our News Desk