The caution culture fails to address youth crime and sends the wrong message to young offenders, a think-tank said today.
The Policy Exchange said three in four people were not confident in how young people accused of committing an offence were dealt with by the criminal justice system.
It also found that while the number of people aged 10-25 who admitted committing at least one criminal offence rose, the number of convictions was falling.
It called for the "ineffective and expensive" Youth Justice Board to be scrapped, saying it was wasteful and overly bureaucratic.
Max Chambers, a research fellow in the think-tank's crime and justice unit, said: "The new Government needs to get a grip on youth offending and get the money to the front line.
"Given this, and the scale of the savings required, this means that the Youth Justice Board should be scrapped.
"Although full of well-meaning officials, it is wasteful, overly bureaucratic and its central co-ordinating functions could easily be given back to the Ministry of Justice."
The think-tank said such a move would save the department almost £100 million over four years.
"Meanwhile, giving the youth custody budgets to local authorities would provide them with a real incentive to find effective ways of stopping kids committing crimes," Mr Chambers said.
A review of the Youth Justice Board found £4 million could be saved from its operating costs by 2012-13 "through supplier efficiencies arising from the renegotiation of service contracts".
Mr Chambers added that while police should always have the discretion to issue cautions, "the caution culture that has developed has sent the wrong message to young people and failed to address the youth crime problem".
"Offending needs to be tackled at an early stage, when there is the best opportunity of getting youngsters off the conveyor belt to crime," he said.
Figures from the British Crime Survey showed that while 80% of people believe the criminal justice system respects the right of people accused of committing a crime, only 24% have confidence in how young people accused of committing an offence are dealt with.
The proportion of males born in 1988 who had one or more convictions at 17 was less than half the proportion of those born in 1958, dropping from 15% to less than 8%, a Ministry of Justice report showed last month.
The proportion of women of the same age also went down, from 2.8% to 1.9%.
The report, Conviction histories of Offenders between the ages of 10 and 52, said many of the offenders in later years "are likely to have been given cautions rather than being prosecuted".
Home Office statistics, released in 2006, also showed that 49% of people aged 10-25 admitted committing at least one criminal offence over a four-year period.
Mr Chambers added: "It's clear from this survey that most people still feel as if they are being let down by the system, and that in particular it's young offenders who aren't being dealt with effectively."
But Frances Done, chairwoman of the Youth Justice Board, said: "There have been significant achievements in the youth justice system.
"Over the past couple of years, 20,448 fewer children and young people entered the youth justice system, there have been over 5,000 fewer re-offences committed by under 18s, from 2005 to 2008, and in the last few years over a thousand fewer young people have entered custody.
"These Government figures show a youth justice system which is delivering results.
"The Youth Justice Board provides leadership in cohesion and innovation in achieving the best outcomes for some of the most challenging and volatile children and young people in our society.
"The Youth Justice Board has demonstrated that working in partnership with different local agencies gives under 18s, in trouble with the law, the best opportunities to stop reoffending and provides the best chances of rehabilitation, leading to more productive lives."
A Ministry of Justice spokesman said the Government was carrying out "a comprehensive assessment of youth and adult sentencing policy" and will consult on its proposals for reform in the autumn.
"We are looking at all arms-length bodies and considering whether they should be retained," he said.
"The Youth Justice Board (YJB) will be included in this process. Under the previous government a review of the YJB was undertaken and we will be looking at the recommendations of that review as part of this process.
"The YJB has an important aim to prevent offending by children and young people. As part of the rehabilitation revolution, the Government intends to do everything possible to ensure the best outcomes for young people, their families and communities."
He added that the Government was "committed to tackling youth crime and anti-social behaviour".
In 1971, six per cent of offenders were dealt with by means of a caution, but this increased to 16% by 1991 and to 20% by 2006, figures released by the Ministry of Justice last month showed.