Economics of Drug Law Reform

We argue that New Zealand needs to change its drug laws for human rights, health and social reasons. But we can also show change makes sound economic sense.

The Drug Foundation, together with Matua Raki and the Needle Exchange, commissioned an independent economic analysis of our model drug law, Whakawātea te Huarahi. The report tests the costs and benefits of:

Decriminalising the use and possession of all drugs
Legalising cannabis
Investing more effectively in prevention, education, harm reduction and treatment

The figures show that drug law reform adds up.

Getting people the support they need is more cost-effective than convicting people.

Treating drug use as a health issue instead of a criminal one means considerable cost savings from enforcement. Our proposed policy would remove criminal penalties for the possession, use and social supply of all drugs. This would free up police resources to focus on serious crime, allowing other agencies to address the underlying causes of problematic drug use.

Removing criminal penalties for low level drug offences would result in a net societal benefit of $34m to $83, mostly from savings to the criminal justice system.

If we combine decriminalisation with better investment in harm reduction, prevention, education and treatment the savings are even harder to argue with. The report calculates the savings we should see if we double the current addictions-related health budget to $150m each year, to bring us into line with current demand: New Zealand would be better off by an overwhelming $112m - $1,001m per year.

It’s worth noting that this investment in health and harm reduction needs to happen regardless of any changes we make to our outdated drug laws.

The report also mentions a potential $100million savings per year resulting from better employment outcomes for those who in future will not receive a criminal conviction for drug use. It’s very difficult to accurately measure this kind of benefit so the report didn’t include these potential savings in the final calculations.

Regulating the legal sale of cannabis would mean better public health and social justice outcomes. But there is another bonus – it will pay for the much-needed investment in health-based approaches.

The legalisation of cannabis would save the justice sector about $10 million and bring in additional tax revenues of $185 to $240m per year. This money could pay for the drug-related treatment, harm reduction, prevention and education programmes New Zealand desperately needs.

Our full policy is cost-effective, allows people to get the help they need and does not burden them with a drug conviction.

The report confirms that not only can New Zealand create a safer legal system, but the economics stack up. Law reform is the right thing to do - and it will more than pay for itself.