Tony Blair is planning a controversial U-turn on cannabis laws and the reintroduction of tough penalties after an official government review found a definitive link between use of the drug and mental illness.

The Independent on Sunday can reveal that the Advisory Council on the Misuse of Drugs (ACMD) has detailed evidence showing cannabis triggers psychosis in regular users. The findings are expected be used by Mr Blair to overturn the decision made two years ago to downgrade the drug. The reports makes it "an open door" for ministers to change the law, according to one official.

Mr Blair is keen to reverse the controversial decision to downgrade its status from B to C, taken by David Blunkett. His successor as Home Secretary, Charles Clarke, asked the Government's official advisory body to reassess the classification of the drug after a public outcry.

A senior Whitehall aide said: "There is no barrier to reclassification of cannabis on the grounds of political embarrassment. This was David Blunkett's decision, not something agreed by the Cabinet."

Pressure for a U-turn will intensify once the ACMD report is published. It will detail evidence that varieties of "skunk", high-strength strains of cannabis, can cause psychosis in some people and that cannabis can exacerbate the condition of users who are already mentally ill.

The Home Secretary will announce his official decision on the classification next month. Officials say he is "minded" to restore the drug's original B rating. Obstacles to a U-turn remain, however, particularly the attitude of the police. Ministers must overcome police fears that it will reduce their ability to focus on class A drugs such as heroin.

Most senior officers supported the original decision to downgrade because it helped them to focus on class A drugs.

The original decision to drop cannabis's status to C also reflected advice that it carries a lower risk of addiction and health-related problems than other drugs. However, fresh studies have since indicated that there is a strong link between the drug and "psychotic symptoms".

A Danish study published in the British Journal of Psychiatry found that almost half of patients treated for a cannabis-related mental disorder went on to develop a schizophrenic illness. People who had used the drug developed schizophrenia earlier than those with the illness who had not smoked marijuana.

In light of these new warnings, Mr Clarke asked the ACMD in March this year to review the classification of cannabis. The committee took evidence from police, mental health campaigners and drugs education charities. One area of investigation has been the harms of new strains of cannabis known as "skunk", which have high levels of tetrahydrocannabinol (THC) - the chemical which gives users a "high".

Although the ACMD does not believe that the health risks justify cannabis being moved back to class B, it does draw attention in its report to the health impacts of a rise in the use of skunk, which has been fuelled by increasing numbers of people growing their own marijuana.

Despite reports that cannabis use is rising, official figures show that use among 16- to 24-year-olds has gradually fallen over the past seven years.

Although it is a class C drug, cannabis possession, production and supply are still illegal, although the penalties have been reduced.

The maximum penalty for possession has been reduced to two years' imprisonment. Most offences of cannabis possession now result in a warning and confiscation of the drug.