The Treasury has given the service 45,000 a year for three years. The funding will allow the appointment of a person responsible for restorative justice training for children's home staff.
Restorative justice involves arranging a meeting between a victim and offender to help them understand each other's perspective, and resolve the situation.
By encouraging the technique in children's homes the youth offending service hopes to reduce the number of relatively minor incidents that have to be dealt with by the police.
Wendy Poynton, head of the youth offending service, said: "We want to tackle challenging behaviour in ways that will encourage young people to consider the victim's perspective, and allow staff to develop different approaches."
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