The Liberal Democrats are looking at the decriminalisation of all drugs for personal use and allowing cannabis to be sold on the open market.

Launching his party's draft election manifesto, Nick Clegg, the deputy prime minister, said the party would consider such options after they were advocated in a policy paper due to be discussed at the Lib Dem conference next month.

The paper said the Lib Dems "will adopt the model used in Portugal, where those who possess drugs for personal use will be diverted into other services". The southern European country decriminalised personal possession of all drugs in 2000.

The document also said the party "welcomes the establishment of a regulated cannabis market in Uruguay, Colorado and Washington state".

"These innovative approaches are still in their infancy and the data that would allow us to examine their impact are not yet available. We will establish a review to examine the impact of these schemes in relation to public health," it said.

At the moment, the party's official stance is that it will end the practice of sending people to prison if they are caught in possession of drugs for personal use, and move drugs and alcohol policy from the Home Office to the Department of Health. It is also considering how to divert drug users "into treatment or other civil penalties which do not attract a criminal record".

The broader policy paper will be debated at the Lib Dem autumn conference in Glasgow and is likely to be backed by members.

Speaking at the launch of the Lib Dem "pre-manifesto", Clegg said: "There are lots of experiments in US states, countries in south America, Portugal, which are doing a number of different things. What we are saying is we will look at it, we will look at what the evidence shows works … Drugs policy has been blighted in this country by kneejerk prejudice and the wish to appear tough rather than doing what actually works. If other countries develop strategies that show real results, let's look at that."

Clegg has been vocal over the past few years about his belief that current drugs policy is not working. However, his Conservative coalition partners are unwilling to do anything that looks like a move towards decriminalisation.

In 2012, the Lib Dem leader accused politicians of "a conspiracy of silence" about the problem of drug addiction and argued that the UK was losing the war "on an industrial scale".

Norman Baker, the Lib Dem minister in charge of drugs policy, has called on the coalition to legalise the widespread use of cannabis to relieve symptoms of certain medical conditions, including the side effects of chemotherapy.

Baker wrote to the health secretary, Jeremy Hunt, in August to call for a review of the medicinal properties of cannabis.