The Liverpool City Council-run Gladstone House will close its doors in March 2008.
A spokesman for the council said the 18-bed facility was closing because the council had failed to reach a deal with the Youth Justice Board (YJB), which purchases places in secure children's homes for young offenders. "Unfortunately we have been unable to do so because the amount offered was £1m short of what is required," he said.
The YJB said the council's proposed new rate exceeded other local authority prices in the area and so it decided not to renew its contract.
Frances Crook, director of the Howard League for Penal Reform, described the closure as depressing. "Local authority secure care homes have the best record of reducing offending rates. We need more, not less of them," she said.
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