Lord Jim O’Neill, one of Prime Minister Andy Burnham’s most valued economic advisers, has warned that the Jim O’Neill growth postcode pledge risks wasting taxpayer money and storing up political trouble, arguing Burnham should instead focus on cutting gilt yields as the more effective route to broadly shared prosperity. The warning came as long-term government borrowing costs surged to multi-decade highs.
Speaking to Centre for Cities, a think tank that has long been favoured by the former Manchester mayor, O’Neill said he was ‘not a huge fan of “growth in every postcode”‘. He told the audience that most people would interpret the slogan as a commitment to directly intervening to lift growth across every corner of the country. ‘Good luck with that strategy,’ he added.
‘It would almost definitely result in some wasted taxpayers’ money and with it create political questions that they might want to face,’ O’Neill said. His preferred prescription is rather more targeted: get 10-year UK gilt yields down by 150 basis points, which he said would feed directly into lower mortgage rates and, in turn, deliver the kind of broad-based improvement in living standards the slogan promises.
Gilt yields at levels not seen for a generation
The backdrop to O’Neill’s intervention is a bond market that has been moving sharply in the wrong direction. The 10-year gilt yield, the benchmark for government borrowing costs, has climbed from a low of around 4.65% in April to over 5.2% this month. According to BBC News, the yield on the 30-year gilt rose to 5.89% on Tuesday, the highest level since 1998.
The Institute for Fiscal Studies has noted that 30-year gilt yields have risen by around 100 basis points over the last year, climbing from 4.5% to settle at around 5.5% and peaking at 5.7% in September 2025. That trajectory puts considerable pressure on the government’s spending headroom.
Higher borrowing costs have intensified concern that Chancellor Rachel Reeves could have little option but to raise taxes to restore the £23.6 billion fiscal buffer that sits at the heart of Labour’s fiscal rules. Critics argue such a move would dampen growth further, compounding the very problem the government is trying to solve. Burnham has pledged to adhere to Labour’s existing fiscal rules, according to Tembo Money, meaning the pressure on those rules lands directly on his administration’s credibility.
Jim O’Neill growth postcode critique and the case for London
O’Neill’s remarks carry particular weight because of his proximity to the new administration. He was publicly trumpeted as a top adviser to Burnham during the Makerfield by-election campaign, and City AM reported he was in talks to take on an official role. He subsequently declined the offer. BBC News confirmed that O’Neill turned down the offer of a formal position in the prime minister’s team.
His willingness to speak critically in public, and to do so in front of a devolution-focused audience, underscores the difficulty Burnham faces in managing expectations that have been built up around his regional growth agenda.
O’Neill also used the Centre for Cities appearance to make a case that will sit uncomfortably with parts of Burnham’s political coalition. He argued that London should continue to grow at a high pace and be ‘given some kind of priority’ in the interest of national growth. He acknowledged this was ‘quite ironic’ given Burnham’s commitment to improving growth prospects across the North of England.
Since declining the formal adviser role, O’Neill has also warned the government against raising capital gains taxes, citing the possible effect on risk-taking. That advice, taken together with his critique of the postcode growth pledge and his backing for London’s primacy, puts him at odds with the distributional instincts that have characterised Burnham’s political positioning.
For a government facing rising gilt yields, a squeezed fiscal buffer and an adviser publicly questioning its central economic slogan, the pressure to demonstrate that ‘growth in every postcode’ means something concrete is building quickly.
