The study, by consultancy PricewaterhouseCoopers for the Department for Education and Skills, said the change would help raise funds to provide more activities for all young people.
The report, The Market for Provision of Positive Activities for Young People, took positive activities to include structured and unstructured activities.
It said the Government was in danger of failing to meet proposed national standards for the participation of young people in positive activities and that a target needed to be set for the involvement of disadvantaged young people.
It also said funding streams should be simplified, funding should be long term and there should be more competition.
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