The Liberal Democrats were told today their drugs policy was wrong and the party should support the legalisation of cannabis and a scheme to provide pharmaceutical heroin to addicts instead of methadone.

Ewan Hoyle, founder of Liberal Democrats for Drug Policy Reform, accused candidates and MPs of being "silent" on drugs since the issue was last discussed at conference in 2002. Then the party voted to legalise the use of cannabis and end jail sentences for possession of all other drugs for personal use, including cocaine, ecstasy and heroin.

But Hoyle said the party had been left vulnerable because they were seen as "soft on drugs". Instead he argued that there needed to be a rational debate.

He called for detailed discussion on regulation, the sale of drugs in pharmacies, and diverting money from sales to fund treatment programmes.

Speaking at the Liberal Democrat annual conference in Liverpool, Hoyle said he wanted to stop young people being "lost in a life of drug dependency".

He told activists in a consultative session: "I put it to you that we have been silent on this issue because we got our policy wrong. Our policy, especially on cannabis, was a soft on drugs policy which has left us vulnerable."

He added: "We have to start discussing policy features like pharmacy sales, the provision of detailed information on harm before individuals are permitted to purchase the drug, and bans on branding and marketing.

"We have to find a policy that can best protect our citizens from harm, especially our children, and that can end the massive profits from the criminal gains that control the illegal trade.

"One by-product of such a policy on cannabis could be hundreds of millions, perhaps billions of pounds, raised in taxes.

"There are nearly 1 million young people unemployed in the UK and hundreds of thousands of problem drug users. We need to find a way to stop the lost generation of unemployed youth becoming truly lost in a life of drug dependency."

Hoyle said there had to be a move away from the provision of methadone to heroin addicts.

He said: "Methadone works but diamorphine is considerably more effective and diamorphine is being sold to hospital pharmacists at approximately one-fifth of the cost of the equivalent dose of methadone."

He added: "Increasing numbers of respected figures in British society and the international community have been calling for decriminalisation and legalisation to be debated.

"It is time the Liberal Democrats answered those calls and engaged in rational debate."