The Liberal democrats are to call for the decriminalisation of all drugs, including heroin and cocaine, to be considered urgently by the Coalition Government in an effort to cut levels of addiction.

The party's conference is preparing to back demands for Britain's "harmful" and "ineffective" drug laws dating back 40 years to be swept away and replaced with an entirely new strategy for tackling drug use.

Nick Clegg, the Deputy Prime Minister, who has previously supported drug decriminalisation, is understood to be relaxed about his party committing itself to such a contentious policy proposal.

But it would be bound to provoke tensions with the party's Conservative coalition partners, who strongly oppose reform of drugs laws.

The Liberal Democrats look certain to call for the immediate establishment of an expert panel to draw up plans to decriminalise all illicit substances.

The proposed reform is based on legislation in Portugal, where the personal use of any controlled drug is no longer a criminal offence.

Although its possession will still be illegal, users would no longer face a jail sentence or fine, but would instead be required to undergo treatment or counselling for their habit. The current penalties for dealing would remain.

A motion to be debated by the conference says: "Individuals, especially young people, can be damaged both by the imposition of criminal records and by a drug habit. The priority for those addicted to all substances must be healthcare, education and rehabilitation, not punishment."

It argues: "Those countries and states that have decriminalised possession of some or all drugs have not seen increased use." The motion adds that "heroin maintenance clinics" set up in Switzerland and the Netherlands as an alternative to jail for addicts have had great success in reducing crime and the prevalence of hard drugs.

And it points to the call from the Global Commission on Drugs Policy, headed by the former UN secretary general Kofi Annan, for governments around the world to consider the regulation of drugs.

The conference motion also suggests the expert panel prepares alternative proposals for the creation of a "strictly controlled and regulated cannabis market".

Senior Liberal Democrat sources predicted last night that the motion would be overwhelmingly passed, automatically making it party policy.

"This is not a proposal from a lunatic fringe," said one. "It is a recognition of the general failure of drugs policies both in Britain and across the world."

A spokesman for Mr Clegg said he would "watch the debate with interest" on what was a "perfectly valid and legitimate debate for a party".

The vote in favour of the moves would not guarantee their inclusion in their next election manifesto, but the party leadership made clear it was sympathetic to the calls. The Liberal Democrats have consistently argued that drug laws should be based on scientific advice, but have never committed themselves in a manifesto to decriminalisation.

Danny Kushlick, the director of Transform Drug Policy Foundation, said: "We're delighted because this enables an historically taboo area to be publicly debated. It should pave the way for the other big parties to engage seriously in a non-party political way in how to deal with one of the big problems facing the UK."

Last year the former Drugs minister, Bob Ainsworth, became the most senior politician to back decriminalisation. The Labour MP argued that it would be better for addicts to receive their fixes on prescription rather than relying for their supply on the criminal gangs. He said his departure from the front bench gave him the freedom to express his view that the "war on drugs has been nothing short of a disaster".

Under the 1971 Misuse of Drugs Act, illicit substances are divided into three categories. Possession of class A drugs, which include heroin, cocaine, crack cocaine, Ecstasy and LSD, carry the harshest penalties.

Class B drugs include cannabis and amphtamines, while such substance as ketamine, GHB, many tranquilisers and anabolic steroids are in class C.