Does The Criminalisation Of Cannabis Impact The UK Economy?

Cannabis & The UK Economy

Cannabis & The UK Economy

When it comes to assessing the UK’s black market economy it’s obviously quite tricky to avoid sheer speculation.

Depending on which public or unofficial body of ‘experts’ you listen to, it’s estimated that the potential value of legalising cannabis is between £750m – £10bn.

Such a differential is not due to the value of the approximately 255 tonnes of marijuana taken in the UK last year. Anyone who smokes knows that if anything, black market prices change at most once a decade, and the actual figure consumed is likely way higher.

Either way, the cost of criminalising cannabis is now broadly regarded as being counterproductive to the UK economy.

The Institute of Economic Affairs – perhaps one of the most Thatcherite ‘think tanks’ going – has suggested quite simply that if performed correctly, decriminalising is a win-win-win scenario.

The economy would receive around a £2.6bn boost, taxable jobs created, and public health will improve long-term compared to being an island of just drinkers and tobacco users.

So What Is A Realistic Figure Of The UK Cannabis Trade?

The aforementioned IEA study is likely in a sensible ballpark. If anything, they tend to undervalue products and commodities in order to provide a cushion to sudden shifts in the global market.

Many pro-cannabis campaigns will treble or more that valuation, but you need to consider the impact that it will have on spending.

Let’s think hypothetically. For example, instead of going out for a few drinks at maybe £20 or so – people may chill out at home and instead settle into some recreational marijuana use.

Doing so will take the money from the alcohol industry and instead place it into the marijuana one.

Ambiguous as those figures may well be, the fact remains that the same amount of money is still circulating. Just in different ways.

An alternative scenario may be people who still drink just start to use cannabis as well.

The money still has to come from somewhere, so while they may be more buzzed or whatever the cash that could have been spent on a new TV is instead being splashed on drugs.

The knock-on effect for that on the economy is impossible to gauge – but let’s hold fire before declaring doom and gloom.

Let’s Look At The Evidence

Plenty of countries very similar to the UK in regards to spending habits have recently experienced a relaxation of marijuana laws. Canada being a prime example recently.

Initial changes are barely perceivable. Society has not collapsed, and if anything it has provided a means for more entrepreneurial thinking.

The west coast of the USA saw an explosion in the number of outlets the moment those states made access to marijuana far easier. A good number have folded, and those that thrive have tended to diversify. So instead of a ‘weed store’ you instead find a busy cafe that may sell marijuana as well.

In an ideal world, that’s exactly the model that proponents of decriminalising cannabis in the UK are wishing for.

It will boost economies by providing jobs across a wide range of sectors, while also providing a means to access better quality and cheaper strains.

Early indications suggest that the use of other – and rightly highly illegal and dangerous drugs – is falling, as well as related pressures on legal and healthcare services.

So for the overall economy, it’s very difficult to see much of a downside at all.

So What’s Stopping Us?

The UK doesn’t quite fit the USA or – very soon – the Canadian model.

Our legislature has been ferocious (on paper) against marijuana for decades.

Despite around 3m people regularly taking it for personal enjoyment, and untold others for medicinal use, it can still land you in prison for possessing what is considered above ‘personal use’.

So, you could have a personal grow to harvest once a year, and still be sharing a cell with a major drug trafficker – if busted at the wrong time.

The criminal element also plays a major role. It costs over £50m a year to incarcerate the small proportion of people (around 1200) held for cannabis related crimes. Seizure of untaxable assets and income is staggeringly low. To put it bluntly, there’s no reason why career criminals cannot make hay and hide it away at risk of a short spell in lockup.

Instead of seizing those assets, why not just make them taxable? Sure, there’s a good proportion of growers/dealers who wouldn’t fancy being propelled into a 50% tax bracket.

Examples from overseas have demonstrated that going ‘legit’ can be done successfully, boosting revenue from income tax and national insurance by a huge amount.

Quite how to manage that is a headache – but no worse than when prohibition laws were lifted in the States 80 years ago.

The IEA estimates that decriminalisation would lead to just a 5% residual of cannabis being sold on the black market. Most of that will be personal home grows.

At just a 20% tax – way below what alcohol and tobacco are set at – that would bring in £690m a year. While also saving approximately half that amount due to less pressure on public services.

So, all in all, it would potentially save the country a billion pounds per year, and also add an untold amount of additional income through taxation.