The Local Government Association (LGA) said the £15bn system was awash with different strategies and age ranges.
In a report, the LGA claimed councils could provide support for young people if some of the schemes were combined.
The Department for Work and Pensions said it was providing an extra £1bn over three years to help young people.
The LGA’s David Simmonds said national approaches were “failing to get to grips with local issues”.
Research by the LGA suggested that people aged 13 to 24 received support from at least eight different national organisations which funded 33 schemes across 13 age boundaries.
The Hidden Talents report said central government had failed to get support to those young people worst-hit by the recession.
The LGA said those classed as “core-neets” – young people not in employment, education or training for more than 12 months – were growing at a faster rate than any other group.
This group costs the country £4,600 per person a year in benefits and lost tax, the LGA said.
The organisation said that by pooling six of the current funding schemes – with a combined budget of £1bn a year – local councils could offer “intensive support” to get young people into work and education.
Mr Simmonds, chairman of the LGA’s children and young people board, said: “Youth unemployment is a worrying trend for us all. For young people, being unemployed for long periods of time can have scarring effects that can last a lifetime but the ramifications go even further, having a huge impact on our local economies and wider plans for growth.
“The growing number of core-neets is particularly frustrating for councils, which have a responsibility to look after the welfare of all young people in their area but are restricted in their ability to do so by nationally driven approaches that are failing to get to grips with local issues.”
He added: “Councils are in a unique position and can play a pivotal role in identifying young people that are likely to slip into periods of entrenched unemployment.
“But we need to be given the levers and right resources to help equip future jobseekers with the skills, confidence and real-life experience they need to find work in their area.
“We are putting a new offer to government, to let us help this group and to help save the taxpayer millions of pounds in the process.”
The Department for Work and Pensions said tackling youth unemployment was an “absolute priority” for ministers.
A spokeswoman said: “The Youth Contract will provide nearly 500,000 new opportunities for young people, including apprenticeships and voluntary work experience placements.
“On top of this, we have replaced piecemeal back-to-work support with the Work Programme that is the biggest payment by results scheme this country has seen.
“Our approach gives local charities and grass roots organisations the flexibility to be innovative, using their local skills and expertise to design support tailored to individuals.”