Young offenders who receive more serious community or custodial sentences remain as likely to offend again as they were 10 years ago, costing the economy up to £11 billion last year, figures show.
More than half (56%) of young offenders sentenced by the courts are convicted again within a year, compared to 40% of adults, the National Audit Office (NAO) said.
But managers in youth offending teams have little evidence as to which areas of their work help cut reoffending, leaving the youth justice system "in a weak position to know which activities to cut and which to keep to ensure that outcomes do not deteriorate", the NAO said.
Offending by all young people cost the economy between £8.5 billion and £11 billion last year, but costs could be saved by getting rid of up to 11% of custody places, the NAO said.
The Youth Justice Board set a safe operating limit of 93% of capacity, to allow for unexpected events, but only 82% of places were being used in 2009/10.
Margaret Hodge, chairwoman of the Committee of Public Accounts, said: "It is regrettable to see that practitioners have so little robust evidence about which of their many activities are most effective. This is the more worrying because, with cuts in prospect, they will soon face difficult choices about what to stop doing."
Amyas Morse, head of the NAO, added: "More should be done to find out which interventions are the most effective in dealing with offending behaviour so that, in future, money can be directed at what works."
Three in four managers of youth offending teams agreed it was difficult to find evidence of what works for certain areas of their work, the NAO said. And one in three assessments of young offenders were "not of sufficient quality".
A Ministry of Justice spokeswoman said: "We welcome the NAO's report, which we will consider carefully and take appropriate action to address.
"The Government is committed to tackling youth crime; reducing reoffending; and providing a more effective service for the public - we are consulting on proposals for youth justice reform in our Green Paper on sentencing and rehabilitation."