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Cannabis could generate as much as £1.4bn a year in tax revenues for the Treasury if it was legalised (Reuters) Reuters

If politicians and the public can put aside long-held prejudices, then they may be able to solve some of the tough economic questions Britain has to answer by unleashing the financial power of two untapped markets: drugs and prostitution.

These multi-billion pound industries lurk in the shadows of Britain, operating at every moment of every day in every part of the country.

Ending Britain's role in the War on Drugs and its criminalisation of the sex worker industry, for many, makes perfect fiscal as well as moral sense.

"It's win, win, win," Danny Kushlick of the Transform Drugs Policy Foundation tells IBTimes UK.

"The point really is that not only are there savings from not prosecuting a futile war, and not creating the vast criminal market that goes with that, there's also the tax."

The English Collective of Prostitutes (ECP), a campaigning body for the decriminalisation of prostitution, shares a similar view.

Prostitution is technically legal within British law, but it is surrounded by other rules that make it practically impossible to carry out lawfully, such as women working on the street being charged with loitering and soliciting, and that two or more women working in one property can be charged with brothel keeping.

"If prostitution was decriminalised, costs would be saved, starting with police and criminal justice resources which are currently dedicated to the surveillance, investigation, prosecution, and even imprisonment of sex workers working collectively and consensually," says Niki Adams of the ECP to IBTimes UK.

"There is no justification for squandering public money criminalising sex workers, especially at this moment in time."

Both industries are big. Given that they are off-the-books - you won't find many drug dealers or sex workers filing quarterly earnings reports - it is difficult to put any figure on how much each is worth.

A 2007 report by the Home Office gave a "very rough" estimate of between £4bn and £6.6bn for the six main illicit drugs; cannabis, amphetamines, ecstasy, powder cocaine, crack cocaine, and heroin.

At the time it was worth the equivalent value of 41 percent of the alcohol market in the UK.

In a separate 2008 report the Home Office valued the UK prostitution market at £1bn.

All the while Britain is struggling through billions of economically-crippling austerity measures for its public finances, as the government slashes spending to bring its budget deficit down.

There is no money, claims the government, and so costs must be cut, including vital public services.

The pragmatic and moral cases for liberalising the drugs and prostitution markets are often repeated.

For both there is a sense of the need to recognise that these markets have existed for a very long time and, regardless of their status within the law, people will continue to buy and sell wares within them.

There is the argument that consenting adult individuals should be free to use and abuse their bodies as they wish, such as we see with alcohol, which is deemed by many experts, including the government's former drugs policy Tsar Professor David Nutt, as more harmful to society than the likes of ecstasy.

Decriminalisation would allow for official and accountable regulators to govern the markets, whereas now they are ruled over by the criminal underworld and organised gangs who follow no code but the law of the black market, where money is the sole arbiter of trade.

In the recreational drugs market the watchdogs would ensure supplies are clean, so consumers don't get nasty surprises as they may in the illegal marketplace.

If legalisation were to spread worldwide, it would debilitate the rapacious drug gangs murdering their way around parts of South America.

Similarly with prostitution, protection can be worked into the regulations and better ensure the safety, security, health and wellbeing of those working in the industry, who would also feel more able to report attacks and violence as they would no longer have the fear of incriminating themselves.

"Enormous amount of rape and other violence against sex workers and fear of arrest is a major obstacle to sex workers being able to report. So this violence goes unpunished, serial attackers are left free to attack again and the trauma and hurt caused is a cost to the whole of society," says ECP's Adams.

All these compelling points and more are made often

However, as the world goes through this downturn, and as amid austerity Britain's economy struggles to recover from the financial collapse, perhaps now is the time that serious strides can be made towards a new way of doing things when it comes to drugs and prostitution.

A new way that does not just make political and philosophical sense, but is an economic imperative too - and will have particular resonance with a hard-pressed public navigating a fiscal storm.

Cost savings for the Treasury

Prohibition and a focus on enforcing strict anti-drugs laws is the dominant approach to the illicit narcotics trade the world over.

In Britain alone £1.1bn a year in public money is proactively spent on country's strict drugs policy, including treatment and enforcement.

This plump figure is not even the sole cost to the taxpayer. They are billed for a further £3.55bn in reactive costs when we add the expenditure on drug-related offending.

Decriminalisation would seriously relieve the Home Office's current cost-pressures when it comes to enforcing, policing, and detaining drugs offences, as well as free up police time.

There are those who say that an increase in the availability of drugs would simply mean more public order costs with police mopping up the same criminality associated with boozy Saturday nights across the country, as drink-fuelled violence and misbehaviour that blights High Streets is exacerbated by drug-taking.

"With public order it's interesting because the assumption is that if people take more drugs then the public order issues grow, but what we know is that if people are using more ecstasy and cannabis that their drinking reduces, and actually public order gets better because people spend a lot of time hugging each other and falling asleep and eating Mars Bars rather than fighting," says Kushlick.

"Clearly the opposite happens if people use more stimulants. If people use more speed and cocaine then their rates of drinking go up and the disorder goes up, but it's actually quite a complex picture.

"It isn't one that we can just assume that public order will get worse. The same applies to public health, because it depends how people use drugs in a post-prohibition world."

Some argue that by regulating the drugs market you can save on health costs related to issues such as needle sharing and contaminants.

"There is currently a major bill that arises, particularly with regard to HIV aids and Hepatitis C, so blood-born viruses, which are significantly reduced if you operate a public health model rather than a public order model," says Kushlick.

"Even though you've still got those risk taking behaviours that accrue public expenditure because you've got to deal with them, you can mitigate against them proactively by putting in place clean needles, condoms, and all those kind of things, in places where they don't already have them.

"Let's not pretend that there isn't already a significant public health problem that means a lot of money needs to be spent on people who have caught diseases they needn't have."

Money laundering is also a big problem within the illegal drugs trade across the globe, which could be eliminated easily - along with the related investigation and enforcement costs - with decriminalisation.

Likewise with prostitution, Adams says there are criminal justice costs to be saved.

Prostitution itself is legal in the UK, but other laws around it make it virtually impossible to do lawfully (Reuters)

"Arrests, raids, prosecutions have increased in the last 10 years," she says, citing that in 2004 there were three prosecutions for brothel-keeping compared to more than 80 in 2009.

"Hundreds of women are repeatedly arrested on the streets and sent through the courts. It is common for 25 police officers to raid premises where a couple of women are working together for safety.

"The cost to the health service is considerable. Women are the primary carers in any society, if they are undermined the damage spreads among families and communities.

"More women are going to prison - 13,000 children are separated from their mothers by imprisonment - again devastating lives."

Taxation and job creation

Potential tax revenues to the Treasury from commercial sex and drugs, as well as the economic multiplier effect of the many jobs that would be created in both of these unexploited markets, could be huge.

Each day drug dealers and sex sellers across the country carry out thousands of untaxed transactions.

Research by CLEAR, a campaigning group pushing for reform of the cannabis laws in the UK, suggests that as much as £1.4bn a year could be raised from a £1 per gram flat rate duty on marijuana.

As well as VAT on these goods and services, any newly formed companies would have to pay corporation tax, not to mention the income tax generated from a new wave of employment.

At a time when tax receipts are falling, and the unemployment level is at 2.53m out of work, the slumped British economy would welcome this much-needed lift.

However, ECP's Adams doubts how significant the tax benefit from prostitution would be.

"Many sex workers already pay tax, sometimes as sex workers but more commonly as escorts, masseuses etc," she says.

"We don't know if tax revenue would increase if prostitution was decriminalised. The common myth that sex workers make a lot of money is inaccurate in our experience."

Is it a saleable idea?

For many in the public, especially those with a blinding penchant for moral outrage, the idea of making sex and drugs legitimate commodities is always going to be a hard sell, even if there is an inconsistency in how the country currently tackles its policy on adult behaviour.

Two US states have just passed votes to legalise recreational cannabis use, indicative of this normalisation process in industrialised societies.

Washington and Colorado both voted for the law change on the same day Barack Obama was elected back into the White House.

Both states had already approved the medical use of marijuana, and now the businesses growing the herb to this end are set to expand their operations as demand expands to incorporate a legitimate recreational cannabis consuming market.

However the national government may yet pour cold water over the legalisation as it said it remains committed to enforcing the federal laws against marijuana use.

Despite letting swathes of boozers in Britain pour gallons of grog down their gullets in a controlled fashion, the government insists on clinging to a staunchly draconian policy on drugs.

"[Decriminalisation] is to do with the normalisation of the drug, or at least the normal policy response to adult risk-taking behaviours, which is mainly to control and regulate - parachuting, boxing, driving, all of it," said Kushlick.

"I just think, culturally, it's increasingly an anathema to have this set of behaviours operating in what is effectively a very radical policy arena compared to the others."

Selling liberalisation of taboo industries from an economic perspective is easier with politicians than the public, thinks Kushlick.

"With the public I think that there are other things. For instance in Mexico violence is a big selling point where you can say if you take the trade off the narcos, then they're not fighting each other for the trade," he said.

"It's less to do with a straight costs and savings, taxation and revenues thing, it's more to do with value for money.

"For each pound that you are going to chuck at the War on Drugs, you'll accrue further expenditure and that just looks crazy at a time of economic expenditure.

"That isn't something that I think is going to play so well in the public, who are less interested in the detail of how politicians decide to spend our hard-earned taxes."

The drugs and prostitution industries alone would not pay off the deficit, but the potential revenues they would generate for the Treasury, as well as slash the big costs of pursuing its current policies, could save some of the most important public services being lost with austerity.
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