The government should consider whether the National Citizen Service is a "sensible use of money" and charities should campaign alongside councils for more funding for alternative youth programmes, according to the think tank NPC.
NPC said NCS participation figures meant the government should reassess the scheme and it should be scrapped if did not prove to be as effective as other youth programmes.
The council umbrella body the Local Government Association said this week that only 93,000 young people took part in the NCS in 2016 – just 12 per cent of those eligible, falling to 4 per cent of eligible youngsters in some parts of the country.
This was despite the scheme receiving £634m in government money between 2014/15 and 2017/18.
In contrast, council spending on local youth services has fallen by about 40 per cent, from £650m in 2010/11 to just £390m in 2016/17, the LGA said.
The LGA said that these funding cuts led to the loss of more than 600 youth centres and 139,000 youth service places in the UK between 2012 and 2016, and called for some of the NCS’s funding to be transferred to local youth services.
A spokesman for NPC said the government should reconsider whether its focus on funding the NCS ahead of other programmes was justified, and although there was not enough evidence as yet to compare the effectiveness of the NCS with alternative programmes, "it is time to have that conversation".
The spokesman said that if the NCS was found to be not maximising impact, "it should not continue".
Nathan Yeowell, head of policy at NPC, said: "When it was introduced, the NCS redirected almost all central government funding for youth services away from existing local authority and youth voluntary sector services – it is time for these resources to be returned.
"Local voluntary sector and community organisations have the expertise to offer opportunities to young people that they genuinely want to take up in the specific contexts of their individual concerns and interests and the context of where they live.
"The moment has come for them to join forces with local government to ask that this money be used more rationally."
The NAO said last year that the NCS cost £1,863 per participant and was due to exceed its £1.7bn budget if costs did not fall by 30 per cent.
Last year, the government reduced its participation targets for the NCS in 2020/21 by 100,000 places – to 247,000 – after the National Audit Office warned that the target would be missed by 40 per cent at existing growth rates.
A spokeswoman for the Department for Digital, Media, Culture and Sport, which has oversight of the NCS, said: "The NCS has improved the lives of 400,000 young people in disadvantaged areas across the country, teaching life skills, improving confidence and boosting employability.
"In addition, we are investing £80m of government money and lottery funding in projects for young people. This includes opening new youth clubs, improving mental health support services and encouraging young people to take part in volunteering."