Tom Wood, a former deputy chief constable, is the first senior law enforcement figure publicly to admit drug traffickers will never be defeated.
Wood said no nation could ever eradicate illegal drugs and added that it was time for enforcement to lose its number one priority and be placed behind education and deterrence.
But his remarks have been condemned by Graeme Pearson, director of the Scottish Crime and Drug Enforcement Agency (SCDEA), who said he "strongly disagreed" with Wood.
The row has erupted as concern mounts about the apparent inability of police, Customs and other agencies to stem the flow of illegal drugs. It was reported yesterday that an eight-year-old Scottish school pupil had received treatment for drug addiction.
And despite decades of drug enforcement costing millions of pounds, Scotland has one of the worst drug problems in Europe, with an estimated 50,000 addicts. At least half a million Scots are believed to have smoked cannabis and 200,000 are believed to have taken cocaine.
Wood holds the influential post of chairman of the Scottish Association of Alcohol and Drug Action Teams, a body which advises the Executive on future policy. The fact that Wood and Pearson are at loggerheads over the war on drugs is severely embarrassing for ministers.
Wood said: "I spent much of my police career fighting the drugs war and there was no one keener than me to fight it. But latterly I have become more and more convinced that it was never a war we could win.
"We can never as a nation be drug-free. No nation can, so we must accept that. So the message has to be more sophisticated than 'just say no' because that simple message doesn't work.
"For young people who have already said 'yes', who live in families and communities where everybody says 'yes', we have to recognise that the battle is long lost."
He added: "Throughout the last three decades, enforcement has been given top priority, followed by treatment and rehabilitation, with education and deterrence a distant third.
"In order to make a difference in the long term, education and deterrence have to go to the top of the pile. We have to have the courage and commitment to admit that we have not tackled the problem successfully in the past. We have to win the arguments and persuade young people that drugs are best avoided."
Wood said he "took his hat off" to the SCDEA and added that it was essential to carry on targeting dealers. He stressed he was not advocating the decriminalisation or legalisation of any drugs.
"It's about our priorities and our thinking," said Wood. "Clearly, at some stage, there could be resource implications, but the first thing we have to do is realise we can't win any battles by continuing to put enforcement first."
But Pearson, director of the SCDEA, said he "fundamentally disagreed" that the war on drugs was lost.
"I strongly disagree when he says that the war on drugs in Scotland is lost. The Scottish Executive Drug Action Plan acknowledged that tackling drug misuse is a complex problem, demanding many responses. It is explicit within the strategy that to effectively tackle drug misuse, the various pillars of the plan cannot operate in isolation."
Alistair Ramsay, former director of Scotland Against Drugs, said: "We must never lose sight of the fact that enforcement of drug law is a very powerful prevention for many people and, if anything, drug law should be made more robust.
"The current fixation with treatment and rehabilitation on behalf of the Executive has really got to stop."
And Scottish Conservative justice spokeswoman Margaret Mitchell said: "I accept Wood's sincerity, but this is a very dangerous message to go out. I would never say that we have lost the war on drugs. Things are dire, but we should never throw up the white flag."
But Wood's view was backed by David Liddell, director of the Scottish Drugs Forum, who said: "We have never used the term 'drugs war' and it's right to move away from that sort of approach. For every ?1 spent on treatment, ?9-?18 is saved, including in criminal justice. The balance has been skewed towards more punitive aspects."
And John Arthur, manager of the drugs advice organisation Crew 2000, said: "I think Tom Wood is right. This is something our organisation has been arguing for for a long time and it is good to see this is now coming into the mainstream."
Among the ideas now backed by Wood is less reliance on giving methadone as a substitute to heroin addicts.
He says other substitutes should be considered, as well as the possibility of prescribing heroin itself or abstinence programmes.
One new method being examined by experts is neuro-electric therapy, which sends electrical pulses through the brain. One addict with a five-year habit, Barry Philips, 24, from Kilmarnock, said the treatment enabled him to come off heroin in only five days.
Wood said: "We need to look at the other options. Other substitutes are used in other countries. They even prescribe heroin in Switzerland and there is a pilot in Germany, with pilots also mooted in England and, more recently, Scotland. We need to have a fully informed debate."
A Scottish Executive spokesman said: "We have a very clear policy on drugs, which is to balance the need to tackle supply and challenge demand. They have to go hand in hand and we make no apology for that."
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