The two-year project will involve six pilots examining mental health services for young people in custody, forensic child and adolescent mental health services and the role of mental health workers in youth offending teams (YOTs).
The findings will be used to produce guidance for mental health services on working in youth jails. The department is working with the Youth Justice Board and Sainsbury centre for Mental Health on the project.
According to the Sainsbury centre, one in three YOTs lacks a mental health worker.
The Department of Health is in the process of approaching YOTs to become one of the six pilot sites.
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