Nick Clegg may have found £500m for the Treasury (if cannabis is legalised)

A study commissioned by Nick Clegg has found that legalising cannabis would raise taxes worth hundreds of millions of pounds and produce huge savings for the criminal justice system.

Analysis for the Treasury has concluded that regulating cannabis, which was used by more than two million people in the UK last year, could generate "notable tax revenue" and "lead to overall savings to public services".

The Treasury study, seen by our sister paper i, was initiated by the former deputy prime minister ahead of the general election to help formulate Liberal Democrat drugs policy if the party remained in office.

Following David Cameron's general election victory, the Government has set against reform of Britain's 40-year-old drugs laws.

But the research underlined the appeal to the Treasury and the courts and prisons system of following the lead of several countries and US states and legalising and regulating the drug.

Norman Lamb, the Liberal Democrat health spokesman, said the study added to growing evidence pointing to the need for a new approach to cannabis.

Mr Lamb said:

This is an important contribution to the wider debate on drugs reform and shows the UK could make savings in public spending and generate notable tax revenues from a regulated cannabis market, probably in the hundreds of millions of pounds, some of which could be spent on better education around the dangers of drugs use.

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