Taxing the UK Drugs Market

Matthew J Atha BSc MSc LLB

Independent Drug Monitoring Unit

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IDMU has conducted surveys of drug consumption in the UK over the past 10 years, involving a total of nearly 15000 UK drug users recruited at pop festivals and other outdoor events using anonymous self-completed questionnaires, collecting data on frequency of use of a range of different drugs, monthly spending on these drugs, among other data including whether the respondent had been "busted" for cannabis or other drugs.

Estimating Prevalence

Cannabis

An estimate of the number of regular cannabis users in the UK can be arrived with reference to the proportion of the sample who have been arrested for cannabis offences, their average duration of cannabis use (average age minus age first used cannabis) and the total number of cannabis convictions in the UK over the periods in question (historic data from Home Office statistical bulletins). Between 1945 and 2002, there were around 1.23 million cannabis convictions in the UK, the vast majority in the past 10 years.

Year	% Busted Cannabis offences	Avg Duration (yrs)	Busts /use year	Convictions over avg duration	% Regular Users in survey	Estimated Number of Regular Users
1994	21.2%	9.18	2.31%	270250	75.5%	961,073
1995	25.3%	8.69	2.91%	295695	85.9%	1,005,198
1997	21.0%	9.45	2.23%	362966	70.1%	1,209,383
1998	23.2%	12.78	1.82%	605532	67.3%	1,753,261
1999	21.4%	11.48	1.86%	655547	71.0%	2,175,048
2000	19.6%	11.42	1.71%	718519	68.5%	2,516,565
2001	18.2%	11.54	1.58%	768654	73.6%	3,106,950
2002	15.1%	12.80	1.18%	850228	58.2%	3,273,777
2003	17.0%	11.39	1.50%	839902	68.0%	3,350,801
1994-2003	18.2%	10.89	1.67%	818891	67.9%	2,150,228

Prevalence of other drugs

Taking the survey data as a whole, these would represent approximately 3.1 million drug users in the UK (not all of whom use cannabis). By applying the proportions of survey respondents who reported lifetime and/or regular use of other drugs, an estimate of prevalence can be calculated.

Drug	Total Ever	%	Regular	%	Lifetime	Regular	Occ/Exp
Amphetamine	6174	42.4%	957	6.6%	1333385	206681	1126704
Cocaine	5154	35.4%	852	5.9%	1113098	184005	929093
Crack	1026	7.1%	107	0.7%	221583	23109	198474
Heroin	1257	8.6%	133	0.9%	271471	28724	242748
Ecstasy	5592	38.4%	1832	12.6%	1207692	395653	812039
LSD	5883	40.4%	685	4.7%	1270538	147938	1122600
Base	14552		Total Users @ 2003		3142763

It is accepted that estimates of heroin and crack cocaine are likely to be low, due to the methods of data collection at pop festivals and other outdoor venues frequented by recreational drug users, where problem drug users tend to be unwelcome, and unable to afford the entry prices. For historical reasons, our figures are likely to overestimate the current value of the LSD and Amphetamine which have declined in popularity in favour of ecstasy and cocaine.

Bramley-Harker [2001][1] of NERA estimated drug prevalence and spending for the Home Office, and arrived at the following figures for prevalence of regular users for the following drugs, from prevalence of drug positive urine specimens from arrestees[2]. The methodology was effective at detecting users of stimulants and opiates, who tend to be more likely to come to police attention than users of cannabis and hallucinogens.

Drug	Regular Users
Cannabis	595797
Amphetamines	116725
Cocaine	237180
Crack	102606
Heroin	156166
Ecstasy	76354

The British Crime Survey is a household survey which asks interviewees whether they have ever used a range of drugs and if so whether they have used these in the past year or past month. Bennett found that approximately 25% of users with positive tests failed to report use of that drug when interviewed, suggesting their estimates of prevalence should be increased by approximately 33%. The BCS figures for 2000, the most recent year with full details published, were as follows

Drug	Lifetime	Past Year	Past Month
Cannabis	4839231	2330000	1510000
Amphetamine	2258308	562414	188750
Cocaine	1075385	572000	253000
Crack	215077	107000	53000
Heroin	215077	95000	60000
Ecstasy	1182923	401724	215714
LSD	1182923	160690	52069

Maximum and Minimum Figures for regular users. Regular users typically account for in excess of 80% of the value of the market for most commodities, and drugs are no exception.

Monthly Spending on Drugs

Respondents to IDMU surveys are asked to state how much they spend on a range of drugs during an "average month", and how often they use a particular drug. Regular use is categorised as use monthly or more often.

Value of the UK Drugs Market

Spending by regular users

Regular users of any particular drug account for the bulk of spending on that drug. Applying the IDMU spending data to the minimum and maximum prevalence estimates for regular users, annual spending by regular users can be calculated at between £1.46 billion and £5.86 billion per year.

Drug	Minimum Estimate	Maximum Estimate	Monthly Spending	Minimum Value	Maximum Value
Cannabis	595797	3,350,801	£ 86.67	£ 619,652,712	£ 3,484,967,072
Amphetamine	116725	206681	£ 102.24	£ 143,207,568	£ 253,572,785
Cocaine	184005	253000	£ 168.74	£ 372,588,044	£ 512,294,640
Crack	23109	102606	£ 444.59	£ 123,288,364	£ 547,411,218
Heroin	28724	156166	£ 447.40	£ 154,213,411	£ 838,424,021
Ecstasy	76354	395653	£ 39.62	£ 36,301,746	£ 188,109,262
LSD	52069	147938	£ 18.89	£ 11,803,001	£ 33,534,586
Total Spending by Regular Users				£ 1,461,054,846	£ 5,858,313,585

Spending by Occasional Users

Total spending by occasional drug users would be worth roughly £687 million per year.

Spending on Drugs by Occasional Users
Drug	Occasional Users	Monthly Spending	% of min	% of max	Total Occasional Users Value
Cannabis	820,000	£ 36.45	37%	9%	£ 358,668,000
Amphetamine	373664	£ 26.31	45%	32%	£ 117,973,133
Cocaine	319000	£ 33.90	26%	20%	£ 129,769,200
Crack	54000	£ 27.59	13%	3%	£ 17,878,320
Heroin	35000	£ 24.65	6%	1%	£ 10,353,000
Ecstasy	186010	£ 19.23	54%	19%	£ 42,923,633
LSD	108621	£ 6.99	44%	21%	£ 9,111,103
Total Spending by Occasional Users			32%	10%	£ 686,676,390

Overall size of UK Drugs market:

The total size of the UK drugs market would thus be estimated at between £2.15 Billion and £6.54 Billion per annum.

Potential for Excise Duties

2003 UK Drug Prices & Profit Margins:

Current prices of drugs, from 2003 survey. Production costs are based on the following:

Cocaine/Crack - $2000 per kilo (Columbia) at 70%, ounce/gram @ 40%

Cannabis Resin - £150 per kilo (Morocco), UK Kilo and 1/8oz prices

Cannabis Skunk Ø estimated £170 per kilo in electricity, nutrients and equipment, UK Kilo and 1/8oz prices

Amphetamine/Heroin Ø Pharmaceutical prices at 100%, retail at typical street purity, wholesale amphet at "base" prices @ 40%, street @ 14%, heroin at 50% purity

LSD/Ecstasy Ø guesstimates for production, UK 100 tab and 1 tab prices

UK Drug Price Trends

Prices of cannabis resin, ecstasy and heroin have fallen sharply in recent years (all by 50% or more), although skunk, amphetamine and cocaine prices have remained stable, and LSD prices have increased over the past 10 years.

UK Drug Price Trends 1995-2003
Drug	1995	1997	1998	1999	2000	2001	2002	2003
Resin 8th	£ 14.39	£ 14.06	£ 13.64	£ 12.88	£ 12.01	£ 11.29	£ 10.74	£ 9.96
Skunk 8th	£ 20.21	£ 20.63	£ 20.82	£ 20.98	£ 20.70	£ 19.94	£ 19.95	£ 20.14
Amphet gram	£ 8.28	£ 8.07	£ 8.04	£ 8.74	£ 8.43	£ 8.71	£ 8.85	£ 8.49
Cocaine gram	£ 56.66	£ 50.51	£ 51.92	£ 50.55	£ 49.38	£ 46.20	£ 47.95	£ 47.06
Crack rock	£ 21.50	£ 21.64	£ 19.38	£ 23.65	£ 20.48	£ 18.91	£ 22.23	£ 22.34
Heroin gram	£ 83.33	£ 69.69	£ 71.25	£ 56.40	£ 60.00	£ 54.00	£ 48.54	£ 35.83
LSD Tab	£ 2.99	£ 3.25	£ 3.28	£ 3.26	£ 3.53	£ 3.73	£ 3.68	£ 3.91
Ecstasy tab	£ 11.65	£ 9.84	£ 9.46	£ 8.38	£ 6.99	£ 6.24	£ 5.47	£ 4.02

Market Shares of Illicit Drugs

Cannabis accounts for the vast majority of spending on drugs in the UK, and clear trends are apparent, notably an increase in the use of cocaine and crack at the expense of amphetamine, and an increase in heroin usage. Use of LSD is in long-term decline, and ecstasy use may have peaked, with a fall in market share over the past two years,