The former Undertones signer also hit out a government move that hampered the testing of substances at music festivals.
He was discussing the subject with former Labour spin doctor Alistair Campbell on he and Rory Campbell’s The Rest Is Politics podcast.
According to campaigners, legalising drugs would raise tax revenue that could be channelled into tackling crime and other social problems
Mr Campbell told the show his views on the topic had changed over the years.
He said: “It’s a big question. If you’d asked me 20 years ago, I definitely would have said no. If you’d asked me 10 years ago, I probably would have said no.
“But I’ve definitely moved on it because I think the war on drugs has failed and I think we don’t focus on rehab in the way that we should.”
He then asked Mr Sharkey (64) if he would decriminalise all drugs.
He replied: “I probably would go quite a long way in that conversation because you’re right — the war on drugs has failed.
“I know some people that used to work in that kind of area, in trying to prevent drugs coming into this country.
“I suspect they’d share that opinion, or at least they do with me on a Friday night down the pub after three pints of cider.
“The music industry for the last 10 or 15 years has worked with a number of charities, particularly at the bigger festivals, to provide drug-testing facilities on the simple basis that young people are going to do this, so you may as well actually provide the security that if they are thinking of doing something, they can actually take it to a charity, to a unit, that will test and explain to them the purity of what is they are about to take, and then they can make an informed decision.
“Do you want to guess which government this year, for the first year in 15 years, banned the operation of those charities and those clinics?
“These kids are going to go and do this stuff anyway, whether we like it or not. You can — [and] the live music industry, I think, was trying to lead the way — try to secure that if they are going to do that and make that kind of decision, at least it is being done within some sort of safe space.”
Last month the organisers of the Leeds and Reading festivals blasted a Home Office ruling that on-site drug testing only be carried out if a special licence had been applied for and granted.