The report from the Institute of Economic Affairs has valued the UK’s black market in cannabis at £2.6bn.
In the UK cannabis is a Class B drug, legalising the drug would free up a lot of public services primarily the police.
The government has promised to review the use of medicinal cannabis following two high-profile cases involving severely epileptic children. Conservative leader Lord Hague has also called on the government to debate their stance on cannabis.
According to the drugs advice service Frank, cannabis is the most widely-used controlled substance in Britain.
Anyone found in possession of the drug can be imprisoned for up to five years while supplying it can be punished with a 14-year jail sentence or an unlimited fine.
In its report, the Institute of Economic Affairs estimates that around three million people in Britain used a total of 255 tonnes of cannabis last year. Currently, the average cannabis user gets through 82.5kg of the drug every year and at street value 1g of cannabis is £10.
If the drug was legally available, it would generate sales of £2bn – twice the size of the cider industry. The NHS would also save over £300 million.
Chris Snowdon, head of lifestyle economics at the IEA, said: “Canada and the USA are showing the way.
“Done properly, the legalisation of cannabis is a win-win-win: criminals lose a lucrative industry, consumers get a better, safer and cheaper product, and the burden on the general taxpayer is reduced.
Currently there is only one cannabis product available in the UK and this is Sativex, which is used in special circumstance to relieve the effects of multiple sclerosis.
Anti-cannabis activists say legalising the drug will make it more appealing to the younger generation leading to greater addiction and health problems. Although, these so-called health problems that cannabis causes have never been proven and those of alcohol and smoking have. Both vices the youth still manage to partake in.
Prime Minister Theresa May last year vowed to continue the “war on drugs,” saying “the incredible damage [drugs] can do to families and the individuals concerned”.