Cannabis Legalisation

Currently, the black market for cannabis in the UK is worth £2.6bn; cannabis is sold to over 3 million people a year. The Win-Win-Win of legalising cannabis, as it was described by the Institute of Economic Affairs, has interesting effects on the political and economic landscape. Just like tobacco and alcohol, if cannabis became legalised, it would be distributed and sold in a regulated way. This would allow it to be taxed. Is this the biggest issue in party politics? 

Currently cannabis is sold and distributed through a black market of organised crime. The strength of the drug is not regulated, and neither is money generated through its sale. The consequences of this are felt by the taxpayer in higher policing costs and costs relating to mental health. Generally, there seem to be two schools of thought: decimalisation and legalisation. The former would treat possession of the drug as something as minor as a parking offence, while legalisation would allow free access and usage.

A vision for the future could make buying cannabis as easy as buying a pint of beer, with similar age restrictions and tax levels. Proponents of this model talk about the benefits to the end user. With regulated supply and quality, the drug would be of a higher quality than many people can get off a street corner. The reduced demand on policing and hospitals could be as large as £300bn per year. The political motivations for this seem clear. With the younger voters becoming increasingly disenchanted with politicians, and in particular the Conservative Party, I was sure that this would be a vote winner.

But legalisation is problematic. Firstly there are political issues. A BMG research poll from 2018 found that only 51% of people supported legalisation understood as ‘making it as accessible as tobacco and alcohol.’ Results from a You Gov survey has revealed that a small majority of people would back a relaxation of the law. This small majority can hardly justify a change in the law, and even if it did, it would struggle to break the inertia of politics to be done quickly.

But let us put the political issues aside for a moment and consider the tax model for this proposal. Creating the right level of taxation is important. Too high, and you do not discourage the black-market; too low, and it does not generate revenue to make it worthwhile. Across the Atlantic, in the states of Colorado, Washington and California, which have legalised cannabis, black markets have flourished due to the high prices caused by excessive taxation. In the IEA 2018 report, they propose a VAT plus an excise tax, which they estimate would generate £690m directly, and would save public services £300m a year. An NGO has estimated the potential benefits of legalisation much higher at £3.5bn.

It is hard to find a rational argument to support the existing legislation. While legalisation seems to promote a healthier form of the drug, it wouldn’t necessarily increase consumption. That is putting aside the wider societal benefits of legalisation which have already been discussed. This view is echoed by William Hauge, who said that the current law is “inappropriate, ineffective and utterly out of date.” But just because it is rational doesn’t mean it will be supported by votes, as the evidence shows. Thus, while a change in the law is likely, there is considerable political inertia against it.