Speaking to CYP Now, justice minister Maria Eagle said the concept is "fraught with difficulties", indicating that she is not in favour of changing the current system of custody funding.
"I know where the idea comes from - to engage local authorities in the consequences of how well they do prevention," she said.
"I think there are a number of practical issues that would concern me about whether it could safely or sensibly be done. It is not at all obvious to me it would be better."
The idea of devolving the cost of custody has been championed by Youth Justice Board chair Frances Done.
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