LEGALISING POT: The report says there is "no reason why cannabis should not be able to be used for medicinal purposes in limited circumstances".

Cannabis would be allowed for medicinal use and low-level pot-smokers sent to rehab instead of prison under proposals revealed this afternoon by the Law Commission.

The Law Commission Issues Paper on Controlling and Regulating Drugs also calls for a "major overhaul" of the law governing new drugs like BZP party pills.

Law Commission President Sir Geoffrey Palmer today said there was "scope for a range of different approaches" to drug laws in New Zealand.

"There may be a case for taking more flexible approaches to offences involving possession of small quantities of drugs for personal use," Sir Geoffrey said.

The report says there is "no reason why cannabis should not be able to be used for medicinal purposes in limited circumstances".

Under a proposed scheme, people suffering from chronic or debilitating illnesses would be able to use cannabis under medical supervision, particularly where conventional treatment options had proven ineffective.

Cannabis cultivators would be licensed to provide medicinal marijuana in the same way as other legitimate dealers in controlled drugs, the report said.

Justice Minister Simon Power today said he would be interested in submissions on the report but he would not allow medicinal use of cannabis.

"There is not a single solitary chance that as long as I'm the Minister of Justice that we'll be relaxing drug laws in New Zealand," Mr Power said.

Mr Power's comments were at odds with the report, which suggested there should be less emphasis on conviction and punishment for low level drug users and more on treatment.

"Simply punishing a drug user, without taking steps to address their drug use, is a wasted opportunity," the report said.

It suggested three options where personal use of marijuana was detected. The options were: a three strikes caution regime; on the spot infringement notices; or legislation allowing police to choose from a range of options for punishment.

The regulation of new drugs - like party pills - was recommended for change. The Commission said there should be a new regime where any new psychoactive substance would not be available without prior approval.

The report said that the proposals were likely to raise concern they would lead to an increase in drug use.

"However, most studies in this area have concluded that changes in use levels are independent of the regulatory approach in place - that is, the regulatory approach itself neither increases or decreases drug use," the report said.