Study Estimates £1.25 Billion Annually From Tax and Regulation of Marijuana in England

Sep 20, 2013

England, gateway, Institute for Social and Economic Research, Stephen Pudney, University of Essex, Wales

The Institute for Social and Economic Research, ISERwith the University of Essex, recently concluded a study into a cost benefit analysis of regulating and taxing marijuana in England and Wales. The study examined the potential economic benefits of regulation, as well as examining the possible social costs and social benefits of a policy change. The study, which was led by economics professor Stephen Pudney, found that England and Wales could save up to £300m per year on policing, prosecuting, and treatment if marijuana were regulated. Furthermore, by taxing marijuana, England and Wales stand to make a possible £900m per year. According to the study, the total possible tax benefit would be around £1.25 billion per year.

When attempting to quantify social costs and benefits, the researchers considered implications on mental health, what value marijuana users place on the benefits of marijuana, as well as other social factors. When examining the possibility of regulated marijuana causing a gateway for users to harsher illicit drugs, which previous studies have shown to be false, the researchers here also concluded that the gateway effect was weak or negligible. The real risk of a gateway effect, they said, is on the side of distribution, a risk that would be decreased with regulation.

Another greatly exaggerated focus of the public debate on cannabis policy is the “gateway effect” – the possible increase in risk of involvement in hard drugs caused by exposure to cannabis.  In our view, the evidence for a large gateway effect among cannabis consumers is weak, and there is an often-overlooked offsetting gateway on the supply side, drawing cannabis users into drug dealing.  Licensing of supply might lead to a rise in demand and thus harm through the demand gateway, but it would also remove many people from illicit cannabis supply and thus reduce harm through the supply gateway.  We estimate the reform could generate a net external benefit in the range £20-80m under the most plausible assumption of a moderate demand increase.

The report concluded with a call for more research into marijuana consumption, price, and potency. Want to know more? Read the full report here.