The research, Hidden talents: re-engaging young people, was conducted in partnership with the Centre for Social Justice, the think tank chaired by Tory MP, Iain Duncan Smith.
It claims that Neets figures are rising because government policies are incoherent, disjointed and fail to focus on the needs of the individual.
It also argues that the government should focus more on engaging whole families, because young people's willingness to stay on in education is formed at an early age.
Margaret Eaton, chairman of the LGA, described the report's findings as "deeply worrying".
She said: "A mish-mash of government departments, national agencies, voluntary organisations and local authorities all working to different targets and agendas muddy the water and prevent a coherent approach to dealing with the issue."
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