Statement by ENCOD

28 October 2011

In the current economic crisis affecting European citizens and governments, it is now essential to consider the financial impact of an end to drug prohibition.

This impact can be divided in three areas.

1. Savings on public spending due to a reduction in expenses of law enforcement

In order to calculate the savings on public spending that might occur if drugs were decriminalized, it would be necessary to identify the exact amount of this spending. This is a difficult, if not impossible exercise. However, estimations can be made, based on data that have been provided by both governmental and non-governmental sources.

Governmental data

The European Monitoring Centre on Drugs and Drug Addiction published a report in 2008, ‘Towards a better understanding of drug-related public expenditure in Europe’. The main conclusion of this report was that the research on drug-related expenditure remains largely insufficient.

European countries in general cannot provide estimates of their expenditure on drug policy. Besides, the ways that these estimates are produced differ between member states, which makes a general comparison difficult.

In 2005, the total figure of drug related public expenditure for the European Union (501 million inhabitants) was estimated to be 34 billion euro. This figure was based on an extrapolation of figures from 11 countries. It has a range of uncertainty of 95%, which means the real figure may lie between 28 and 40 billion euros. The percentage of this figure that was spent on law enforcement is unknown.

Based on a calculation made in 5 EU countries (Czech Republic, France, Luxembourg, Poland and the United Kingdom), where 11% of all drug related public expenditure in 2005 was spent on health costs, and 89 % on law enforcement, the total figure that was spent on drug-related enforcement in the EU can be estimated between 25 and 35 billion.

Non-governmental data

Several actors have carried out research into drug related public expenditure in law enforcement in the past years.

In a study of the Universita degli Studi of Rome in 2009, Marco Rossi estimates the total costs of drug-related law enforcement in Italy as 2,1 billion euro, of which 943 million euro were spent only on cannabis prohibition.

The German Hemp Association (DHV) estimated in a study in 2008 (“Finanzielle und wirtschaftliche Auswirkungen einer Cannabislegalisierung “) the total amount of cannabis-related law enforcement costs in Germany as 1 billion euro/year.

The British House of Commons estimated in August 2000 that law enforcement costs to maintain prohibition of only cannabis in the UK amounted to 1,35 billion euro/year.

2. Income for the state as a result of the introduction of taxes on the cannabis market.

Apart from the reduction of public spending on law enforcement as a result of drug law reform, a legal regulation of the market would also produce benefits in the form of tax revenues. A first case to consider in this regard is the regulation of the cannabis market. The consumption of cannabis has become an integrated phenomenon in European society.

With approx. 23 million regular users in the European Union, cannabis is the most used illegal drug. In several European Member States, the use, possession of small quantities and the cultivation for personal use, and even small scale distribution of cannabis to adults is already decriminalized. This measure has increased the possibility to obtain a better view on the cannabis market, so calculations can be made on the tax revenues that could be produced if this market were legally regulated.

Various studies have been made about the financial implications of a possible legal regulation of the cannabis market. From these studies it is possible to make an extrapolated estimation of these implications for the entire European Union.

The cannabis study of the Library of the House of Commons in August 2000 estimated the amount of tax that could be raised on cannabis sold in the United Kingdom as 1,2 billion euros per year.

In 2001 a study by the Free University in Brussels calculated the amount of possible yearly tax revenues of the cannabis market in Belgium as 360 million euro.

More recently, in September 2011, the UK Independent Drug Monitoring Unit calculated in a research that regulating and licensing the cannabis trade in the UK would result in a net gain for the state of about 7.6 billion euro/year.

Likewise, Dutch economist Martijn Boermans of the Academy of Utrecht, estimated the annual tax revenue of a legal cannabis market for the Dutch state as 850 million euro per year. In a study released in 2008, the German Hemp Association estimated this amount for Germany as 2,8 billion euro.

Extrapolating these figures to the entire EU, the total amount of tax revenues that could be produced by legalizing the cannabis market could be estimated between 10 and 25 billion euro/year.

The total amount of income for the state that could be produced by a combination of decriminalization of drugs (leading to a significant reduction in law enforcement) and legal regulation of the cannabis market could be estimated between 35 and 60 billion euro (that is between 70 and 120 euro per capita per year).

3. Other benefits

Regulation of the cannabis market will enable authorities to control the production and distribution of this product. It will ensure the establishment of codes of conduct that guarantee the respect for public health, safety and environment. Regulation will improve the impact of measures to reduce the access of cannabis to minors. People working in establishments where cannabis is purchased can be obliged to carry out age controls, follow courses on the recognition of problematic use, social hygiene etc.

Regulation of the cannabis market will also allow for more lenient rules concerning the cultivation of hemp, which can make an enormous contribution to the economy. The applications of hemp in the area of textile, paper, food, insulation and fuels are considerable. The EU is currently subsidizing the cultivation of hemp: that will not be necessary anymore if farmers could grow it more freely.

At a time of economic crisis, it is particularly important that drug policy expenditure is cost-effective. Despite the many billions of euro in drug-related spending each year, there are significant concerns about the effectiveness of current drug prohibition at the domestic and international level.

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