CHANCER Chancellor George Osborne claimed Britain was sliding towards “good” deflation yesterday after prices rose at their slowest rate since 1960.

Official data revealed the consumer price index (CPI) measure fell to 0.3 per cent in January on the back of plummeting oil prices and a supermarket war.

Other countries have already put in place drastic measures to stave off falling prices, with Sweden announcing a negative interest rate last week.

But the Chancellor said Britain was not seeing “damaging deflation,” claiming credit for the “great news.”

Mr Osborne boasted: “It shows that those who went around predicting a cost-of-living crisis were plain wrong.”

Deflation can be a major negative force, encouraging people to wait for price cuts before spending, increasing the value of national and household debts, and ultimately forcing retailers and producers to cut costs — raising the spectre of lower pay and job losses.

The official statistics come on the back of the latest Bank of England forecast, which predicted negative prices within weeks.

TUC general secretary Frances O’Grady branded the CPI figures “a sign of fragility.” She urged: “We need a strong and sustainable wages recovery, built not just on falling inflation but on higher pay settlements and more decent full-time jobs.”

Labour shadow Treasury secretary Chris Leslie said: “What are we going to do for the longer term? Are we just going to sit back and say everything is fine and rosy? It isn’t.

“The underlying problems still remain.

“If you ask (people) do they feel better off than they did a year ago or five years ago, overwhelmingly they will say No.”

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