Youngsters who commit minor criminal offences or get involved in anti-social behaviour should not face prosecution in the courts, the Liberal Democrats said.
Under the party's new youth crime strategy, children who admit their guilt would be sent before panels of local people to apologise, with punishment in the form of a "positive behaviour order" and work such as cleaning up graffiti.
The proposals a
lso include the formation of a new Youth Volunteer Force to carry out community projects and tougher penalties for shops which sell alcohol to children.
In his foreword to the document, Liberal Democrat home affairs spokesman Chris Huhne said Labour had "criminalised a generation of young people".
The plan views custody for youngsters "only as a last resort" and claims "too many young people are being dragged through the criminal justice system for very minor offences". Instead, Community Justice Panels made up of local people should deal with low-level crimes, with youngsters explaining their actions and making a "symbolic apology".
The Government's Asbo regime should be used less frequently, the document stated, and juveniles who breach an order should not face custody. The party also called for a greater use of restorative justice programmes, so offenders could be forced meet victims and see the consequences of their crimes.
In a bid to prevent crime, shops which sell alcohol to under-18s could face being stripped of their licence at the first offence.
Cannabis would remain a Class C drug, which the Liberal Democrats claimed would allow police to concentrate on more serious crimes. And gun and knife crime hot-spots should be targeted with high-profile policing, with extensive use of intelligence-led stop-and-search powers.
The party called for a Police Community Support Officer (PCSO) within every neighbourhood team to be dedicated to working with local youngsters. The proposals also include "junior PCSO" and "Police Cadet" schemes to improve the relationship between youngsters and the authorities.
Mr Huhne said: "If we want to tackle the problem of youth crime, we need to take action early to stop kids from embarking on a life of crime before it's too late."
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