Dying to Belong, which will be published by the Centre for Social Justice on Thursday, will recommend that gang leaders who refuse support to stop violence should be harassed by police on a daily basis, with even minor offences, such as driving offences, leading to prosecution.
The report, put together by a panel chaired by chief executive of Clubs for Young People, Simon Antrobus, will say that areas where gang crime is prevalent should be called Gang Prevention Zones and made the focus of intensive intervention.
Agencies along with youth workers would offer skills training, drug rehabilitation and help into employment to young people who want to leave gangs.
Duncan Smith said: "Half of the 27 teenagers murdered in London last year were the victims of gang crime. That should bring home the brutal truth that street gangs are a nasty and shocking symptom of the broken society."
Antrobus said the report "recognises that gang members are children and young people first - increasingly younger".
He said: "We won't make sustainable progress in reversing this worrying trend that is pulling children and young people on to the street and into the gangs in our inner cities unless we are prepared to engage with the less eye-catching but vital work of medium and long-term social renewal among our marginalised and disaffected young people."
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