The Children's Society's Dudley Circles initiative will teach local authority care staff mediation and early intervention techniques to resolve problems that could result in young people offending.
Dudley Youth Offending Service commissioned the project because 45 per cent of young people in care in the area who are involved in "offending behaviour" live in residential homes.
The objective is to give care staff the expertise to resolve problems "as parents would in the family home" rather than involving the police in issues such as fighting or truancy.
Treasa Reilly, programme manager at The Children's Society, said: "Youth crime costs this country 1bn each year, but the relentless surge of young people entering the criminal justice system is avoidable. Care staff in Dudley will be equipped with skills to diffuse a difficult situation without getting the police or the court system involved."
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