According to Sir Paul, more than 504 000 surveillance requests to phone and internet companies were made in 2008.
Extrapolating these figures suggests that - assuming each request for interception of phone calls and emails involved a separate person - then one in 78 UK adults was subject to surveillance at some stage during the year, Infosecurity notes.
In the report issued by Sir Paul's office, it was revealed that the bulk of the surveillance data requests came from the police, but other requests came from MI5, MI5 and GCHQ.
Liberal Democrat home affairs spokesman, Chris Huhne, said the figures "beggared belief" and showed that Britain had sleepwalked into a surveillance state.
"Many of these operations carried out by the police and security services are necessary, but the sheer numbers are daunting", he said in a press statement.
"It cannot be a justified response to the problems we face in this country that the state is spying on half a million people a year", he added.
"We have sleepwalked into a surveillance state, but without adequate safeguards. Having the home secretary in charge of authorisation is like asking the fox to guard the hen house."
"The government forgets that George Orwell's novel - 1984 - was a warning and not a blueprint. We are still a long way from living under the Stasi but it beggars belief that it is necessary to spy on one in every 78 adults."
As details of Sir Paul's report became known, Birmingham City Council revealed that it had used its surveillance powers under the Regulation of Investigatory Powers Act (RIPA) to probe 575 incidents over the last five years.
In a freedom of information (FOI) statistic, the council said that the surveillance help it investigate a wide range of illegal activities, including benefit fraud, counterfeiting, anti-social behaviour, money laundering and fly-tipping.
Under the FOI act reply to the Birmingham-based website helpmeinvestigate.com, Birmingham City Council has admitted that 22 senior officials now have the power to authorise the use of RIPA, but declined to say how many people have been successfully prosecuted as a result of surveillance.
According to the Birmingham Mail, in its reply to the FOI request, the council said: "To provide you with the information you have requested, Legal Services would have to retrieve every criminal litigation file and Anti Social Behaviour Order file closed after April 2004, in order to determine whether any evidence was obtained under RIPA."
"It has been estimated that it takes at least 20 to 25 minutes to locate a specific closed file, arrange for the file to be retrieved from archive, and then reviewed to determine whether or not RIPA was used for that specific prosecution", said the council.
"Since April 2004, there are over 2500 files held in respect of criminal litigation alone. Accordingly, it would take at least 800 hours to go through these files alone to determine whether or not RIPA surveillance was used in respect of any prosecution," it added.