Public sector net debt has risen sharply, and is set to increase further, according to latest official figures.

Net debt for July 2007 reached £502.2bn, compared with £471.4bn at the same time last year.

The debt, which is equivalent to 36.4% of gross domestic product (GDP), was revealed in the July public sector finances first release produced jointly by the Treasury and the Office for National Statistics (ONS).

The ONS also revealed that its partnership with the DCLG and the Treasury would continue the work programme to improve the local government account. Debt peaked at 43.8% of GDP in 1997, its highest since the mid-1980s.

The debt ratio then fell steadily as public sector finances improved, reaching a low of 29.8% in February 2002. Since then, it has risen. Calculations for next year suggest a further increase, with the budget forecast for net debt at the end of March 2008 reaching £540bn.

The public sector currently shows a surplus on current budget of £8.6bn, compared with a surplus of £8.1bn in July last year. This, according to a spokesman from ONS, could be attributed to receipts. ‘Effectively, receipts were higher than expenditure,' he said. ‘The main reason for this is that July is a big month for receipts, such as corporation tax receipts and self-assessment receipts.'

He added that focusing on monthly figures could be ‘erratic', providing a distorted picture, and focusing on the financial year to date generally provided a better overview.

Between April 2007 and July 2007 of the financial year 2007/2008, the public sector recorded a deficit of £4.5bn. At the same stage of the 2006/2007 financial year, the deficit reached £3.1bn.