The Local Government Association (LGA) said increased local control could see youth unemployment cut by 20%.
The report, Hidden talents II: re-engaging young people, the local offer, published by the LGA, states the present system is "overly complicated", with 33 different national schemes covering 13 different age boundaries and costing £15 billion a year.
The report says more than 94,000 people completed hair and beauty courses last year, even though there were only 18,000 new jobs in the sector.
By contrast, just 123,000 people were trained for around 275,000 advertised jobs in construction - more than two vacancies for every qualified person, said the LGA.
The LGA's David Simmonds said the current system was "simply not being effective".
"Local councils tend to be much more in touch with these young people who are facing long-term unemployment," he added.
"They tend to know them through the services that they already provide to them and they are therefore in a much stronger position to work with them directly."
The report also highlighted a number of areas where local authorities have little or no control, such as the Work Programme, which pays organisations based on their success at getting people into work.
The LGA said the current system is disjointed and offers organisations little incentive to work together, and the report concluded that councils should be the main commissioners of all employment programmes for young people.
Government figures have today revealed apprenticeshipstarts have topped half a million. In the 2011/2012 academic year, 520,600 people started an apprenticeship. This is an increase of 13.9% on the preceding year and 86.1% since 2009/2010.
Business secretary Vince Cable said: "Whenever I speak to businesses, a lack of trained workers is a frequent concern.
"Today's figures mean we are starting to turn the tide. Half a million people took up an apprenticeship last year, showing that our investment in vocational skills is paying off."
