His comments come on the back of the news that the UK has experienced its first period of deflation in almost 50 years with the retail price index falling to -0.4 today.
He urged the Government to use tomorrow’s Budget to help low and middle income earners who are struggling in the current economic climate.
Cable says: “A gaping chasm is fast developing in the way inflation affects the rich and poor. While those on higher incomes who have seen their mortgage costs plummet are now experiencing deflation, those on lower incomes whose money goes on basics like food and clothes are still seeing their costs rise.
“With lending rates at a record low, the Bank of England finds itself in the unenviable position of fighting both deflation and inflation.”
Yesterday, LibDem leader Nick Clegg announced the party would increase the income tax personal allowance to £10,000 if they were elected, which would give everyone a £700 tax cut.