Legalising cannabis could save £200m in court and police costs and raise hundreds of millions of pounds in tax each year, a leaked government study has revealed.

The Treasury study – which was passed to the BBC’s Newsnight programme – was commissioned by the Liberal Democrats in coalition earlier this year, but was never published.

The study – which was set up to examine the “potential fiscal impacts of introducing a regulated cannabis market in the UK” – states that 216 tonnes of cannabis was smoked in the UK in the past year and that 2.2 million people aged 16 to 59 are thought to have used the drug in that time.

Government analysts judged that a study from the Institute for Social and Economic Research, which concluded that licensing cannabis could raise up to £1.25bn a year, was probably an overestimate.



But the Treasury report concludes that legalising and regulating the cannabis market would “generate notable tax revenue”, as well saving the state up to £200m in court and police costs a year.

Cannabis is currently a class B illegal drug, though it was placed in class C (for drugs deemed less harmful) between 2004 and 2009, removing the threat of arrest for possession. The drug was returned to class B with the then prime minister, Gordon Brown, warning of the “more lethal quality” of much of the cannabis that had become available.

The report became public shortly after a cross-party group of MPs called for the liberalisation of cannabis laws during a Westminster Hall debate in parliament on Monday evening. The debate was called after a petition to legalise the production, sale and use of cannabis attracted more than 221,000 signatures.

Labour MP Paul Flynn said: “[Cannabis has] been tried and tested by tens of millions of people for 5,000 years. If there were any problems with natural cannabis it would have been apparent a long time ago, but all we’ve got is this wall of denial by governments who are afraid of the subject.”

MPs argued that the UK should draw on examples from US states such as Colorado, which legalised the possession of small amounts of marijuana for recreational use by over-21s in November 2012.

The former Conservative minister Peter Lilley said that Queen Victoria had allegedly used cannabis to relieve menstrual pain, adding: “If it’s a Victorian value then surely it can be made more widely available.”

He said: “Lots of things are morally wrong which are not against the law. Adultery is wrong. I think you shouldn’t betray one’s spouse, but you shouldn’t be put in jail if you do.

“We’ve got to get used to the idea that in a free country there will be lots of moral decisions that people have to make themselves without being told by the law what to do.”

On Monday, the Lib Dems announced they would be setting up an expert panel to establish how a legal market for cannabis could work in Britain. The move is backed by the party’s health spokesman, Norman Lamb, and by a former deputy assistant commissioner of the Metropolitan police, Brian Paddick.

The review panel members will include Prof David Nutt, the founder of DrugScience and a former chairman of the government’s advisory committee on the misuse of drugs, Tom Lloyd, a former Cambridgeshire chief constable and chair of the National Cannabis Coalition, and Niamh Eastwood, the executive director of Release, a drug charity. The panel is to be chaired by Steve Rolles, of the drug policy campaign group Transform.

The Lib Dems have historically been supportive of liberalising drug laws. Their general election manifesto this year pledged to allow doctors to prescribe cannabis for medicinal use and to establish a review to assess the effectiveness of legalisation experiments in the US and Uruguay.