SOFT DRUG TURNS TO HARD SELL

Big business and the Treasury could cash in if cannabis were legalised in
Britain, reports Faisal Islam

In a field in southern England 15 tonnes of cannabis is being cultivated in
a giant greenhouse with the blessing of the Government.

Elsewhere in southern England, in Brixton to be precise, the drug is now
smoked openly in the street, even outside the police station.

Although the two events are unconnected, they appear to have unleashed a
torrent of debate. Politicians from the Right and the Left are queuing up
to call for a spectrum of measures, ranging from decriminalisation of the
drug to its legalisation and sale at off-licences.

The outgoing 'Drugs Tsar' Keith Hellawell, who once said that cannabis
leads to harder drugs, was first sidelined, and then he performed a U- turn.

With an illegal market in the drug worth around pounds4bn, it's no surprise
that business, and perhaps the Inland Revenue, are following the debate.

Institutional investors have been impressed with the small Hampshire- based
pharmaceutical company that runs the secret growing facility. GW
Pharmaceuticals is trying out cannabis-derived medicines. A recent share
placement was six times oversubscribed.

Justin Gover, GWP's managing director, says: 'Clearly the cannabis link
gives us a higher profile. But what matters to us is the data from our
clinical trials showing a medical benefit to people suffering from serious
diseases.'

The provision for this medical research required no change in the law. All
that was needed was a Government assurance that the cannabis derivatives
produced by GW would be legally rescheduled if the medicines were approved.

But the big businesses, such as tobacco manufacturers, with strong
interests in the wider debate are keeping rather tight lipped. When asked
to comment, Gallaher and Imperial both say cannabis is illegal and a matter
for Government policy. British-American Tobacco's Martin Broughton insists
it had no plans to sell the drug if it became legal. But there certainly
used to be.

Three years ago, The Observer revealed that BAT had discussed secretly
lacing cigarettes with 'subliminal' levels of marijuana, if it was ever
legalised. The ideas were detailed in an internal memo which was forced
into the public domain by litigation and cited in a US court case.

Cigarette firms anticipating legalisation have already registered brand
names with links to marijuana. In 1993 Philip Morris filed a trade-mark
application in France for 'Marley'. The firm later denied this link. Other
drug-related names registered by companies include Acapulco Gold and Red Leb.

The BAT document considered 'the main threats to the smoking habit... and
draws attention to the undoubted opportunities which exist in the
development of future products'.

Even if the drug were legalised, production of a packet of 20 'Marley'
cannabis cigarettes is unlikely. 'It's more likely that you'd get spin-off
companies, perhaps from the hand-rolling tobacco companies, getting
involved,' says Clive Bates of Action on Smoking and Health (Ash).

But there is a competitive battle. Bates believes that with products such
as Benson & Hedges Mellow, tobacco firms are already toying with branding
that would appeal to people who take cannabis.

'Tobacco companies are analysing their position vis-a-vis illegal drugs.
They are a competitor for where cigarettes fit in the psyche of young
people. They would not want smoking to become the Austin Allegro of drug use.'

'The Government could decriminalise some forms and legalise others. The
advantage would be with the pharmaceutical and food companies which can
demonstrate its safety,' says Bates.

Indeed, with the Government approving cultivation of specific forms of
cannabis for medical research, some say that they could then shut the door
on any other type of legalisation.

Howard Miller, pharmaceuticals analyst at stockbroker Teather and
Greenwood, says: 'The larger pharmaceutical companies will be interested,
but they will want to let GW make the moves, and dismantle the hurdles.'

But perhaps the Government has too much of a vested interest, given the
possible tax bonanza. If the cannabis consumed illegally now was produced
and taxed in Britain in exactly the same manner as tobacco, some pounds16bn
of excise taxes could be raised for the exchequer. That is enough to pay
for 5p off the basic rate of income tax.

But this figure is considered unrealistic for a number of reasons. It does
not take account of changes in buying behaviour caused by legalisation, nor
the split between demand for ready-made cannabis cigarettes and a
roll-your-own product, which would likely be taxed less.

Nor does it take account of the fact that a thriving black market is likely
to remain that way if levying taxes increases the price fourfold.

Matthew Atha, of the Independent Drug Monitoring Unit, suggests excise duty
of between pounds2 and pounds3 a gramme, against a production cost of
approximately 50p. With up to 1,500 tonnes consumed in the UK every year,
up to pounds5bn tax could be raised.

The nature of the wider illegal drugs economy makes calculations of its
total cost difficult. Hellawell has estimated that the cost of law
enforcement alone in the UK at pounds1.4bn a year. The cost of the crime
associated with drugs is put at pounds1.5bn.

Mo Mowlam, the former Labour Cabinet Minister, says taxes on legalised
drugs could help fund the NHS treatment of addicts.

Peter Lilley, the Conservatives' former deputy leader, argues that the
experience of the Netherlands suggests treatment costs would be unlikely to
rise. 'The Dutch have legal outlets and consume less than we do,' he says.

Perhaps more controversially, such a move could help with the Chancellor
Gordon Brown's efforts to infuse a culture of entrepreneurship and risk-
taking in urban areas requiring regeneration. This is the view of the New
Economics Foundation's Ed Mayo: 'By pathologising drug taking, successive
governments have ended up with the worst of all worlds.

'On the one hand, they have created a highly entrepreneurial risk-taking
web of supply and demand, which filters drugs through to every street,
every estate and every tenement in the land. On the other, they have thrown
the problem of dealing with the devastating neighbourhood impacts of drugs
on stretched statutory and non-profit services, that instead of being able
to build literacy, awareness and restraint are left picking up the pieces.'

Indeed, the Dutch experience suggests that decriminalisation leads to the
emergence of cooperatives and small-scale businesses in areas that do not
attract much investment. Lilley's suggestion that there should be special
'cannabis off-licences' offers one example.

'Every pound spent by users for drugs on the street incurs many times that
cost for society in health and policing. Rather than simply offset that
onto wider taxpayers, is there not a case for decriminalising soft drugs
and levying a tax so that the consumer pays, legitimate enterprises can
emerge, and the services dealing issues that underpin substance abuse, such
as poverty and self esteem, be fully funded?' says Mayo.

Cannabis legalisation as an agent of urban regeneration? The Chancellor
won't be designing that new tax credit just yet.

'There is so much evidence that cannabis works in a medicinal sense'

Medicines developed by GW Pharmaceuticals' are exclusively derived from
specially-prepared cannabis plants.

Every stage of the development process is licensed by the Home Office.
Development and cultivation is at a secure greenhouse - cameras are pointed
at every plant.

GW's leading treatment, a drug for multiple sclerosis sufferers, is already
undergoing clinical tests. It is scheduled for release at the beginning of
2004, followed by treatments for cancer pain and rheumatoid arthritis.
Longer-term plans include treatments for epilepsy. Once one of GW's
medicines is approved it throws open the possibility for doctors to
prescribe it for other conditions too.

'Official statistics show that 4% of MS sufferers smoke cannabis. There's
so much evidence that cannabis works in a medicinal sense. But there are a
lot of people who don't want to break the law,' said managing director
Justin Gover.

GW raised pounds25m with its recent institutional placement, which will
fund expansion plans. Its market capitalisation is now pounds155m. The
share price fell on Friday following a report in the British Medical
Journal which questioned the therapeutic value of cannabis.

'We are a research and development company. We have no pretensions to be a
Glaxo. We would expect to get into licensing arrangements with major
pharmaceutical companies in each of these countries - which is the standard
model.'