In a recent survey published by the BBC, Rutland residents can see how the country's smallest county measures up when it comes to council debt.

High levels of local authority debt will see residents face an "extreme and long-lasting" impact on local services, the Public Accounts Committee has said.

Shared Data Unit analysis of data by the Department for Levelling Up shows UK councils owe a combined £97.8bn to lenders, equivalent to £1,141 per resident, as of September 2023.

Taking into account all types of local authorities, such as police and crime commissioners and combined authorities, the debt pile rises to £122bn.

Dame Meg Hillier, the committee's chair, said some examples of debt were "staggering".

But council leaders say years of under-funding mean they have been forced to take out loans and invest in commercial properties just to keep services running.

For Rutland's population of 41,381, the county has £21,386,000 of debt, which equates to £517 per person.

While this seems high, Rutland sits at 258 out of 380 local authorities in the UK included in the analysis.

Medway, for example, is at the top of the pile with a whopping £18,756 debt per person. Woking sits in second place, with £10,415 debt per person.

For the past decade, councils have been encouraged to make commercial investments to provide an alternative source of income aside from the usual mix of grants, council tax, rates and fees and charges. 

Town halls across the country have bought hundreds of commercial assets from shopping centres, to office parks, cinemas, energy companies and housing developments.

But council leaders, who have seen government grant funding reduce by 40% in real terms since 2010, have had to borrow increasing amounts to pay for those investments. This has mainly been through an arm of the Treasury known as the Public Works Loan Board.

In recent years, various commentators have warned that the debts held by councils - which must balance their budgets every year - are unsustainable. In 2020, chair of the Public Accounts Committee Dame Meg Hillier said the Government was "blind to the extreme risks" of council borrowing levels.  

Since then, six more councils have had to issue section 114 notices declaring themselves effectively bankrupt: Croydon, Slough, Thurrock, Birmingham, Woking and Nottingham. 

In the case of Croydon, Slough, Thurrock, Woking and Nottingham - those effective bankruptcies could be directly linked to failed investments and spiralling debts. Thurrock's £469m funding black hole, for example, was caused by a series of failed investments in solar farms.

Yet, despite the risks, a report by the Local Government Information Unit (LGiU) in March also found 52% of councils planned to increase borrowing to plug gaps in town hall funds.

Dame Meg Hillier, the chair of the Public Accounts Committee and MP for Hackney South and Shoreditch, said: "Some of the outlier examples of high local authority debt are staggering, and the impact on services for residents is liable to be extreme and long-lasting. There are of course many drivers of the present situation, not least the day-to-day pressures experienced by local authorities with squeezed spending power and ageing populations living through difficult economic times. 

"Small district councils have very little room for manoeuvre when finances are squeezed, relying on charges (such as parking fees) for a lot of their income. Unitary authorities are facing the demographic pressures on social services, social care and special educational needs.

"But beyond these day to day pressures, the PAC warned in 2020 that some councils had not only pursued strategies of commercial investment exposing them to high levels of risk, but normalised behaviour and optimistically believed that there was little downside to commercial activity. Add to this the delay in public sector audits and many councillors and taxpayers were blind to the risk. 

"Government action to address this behaviour was too little, too late at the time, and though it agreed with our recommendation to ensure that future interventions are more timely and effective, our latest scrutiny in this area indicates that there is much more work to do to ensure the future stability of local government finance. 

"In particular, the impoverished state of the local financial audit landscape has left the vast majority of English local authorities without signed-off accounts. There is a potential as a result for financial disasters to grow undetected at other local authorities in the future."