A meeting of North Yorkshire County Council's corporate and partnerships scrutiny committee heard the proportion of children reoffending in the county was "worryingly high" as it was significantly higher than similar counties and the national and Yorkshire averages.
Steve Walker, of the county's Youth Justice Service, told the committee 29 per cent of all the children under its supervision were from the Scarborough town and Eastfield areas, despite the fact that Scarborough has only 16.7 per cent of the ten-17 population.
He said: "So Scarborough's children are nearly twice as likely to be criminalised. Their rate of reoffending is significantly higher, the rate of the Scarborough girls is dramatically higher."
The committee, which has previously raised concerns over rehabilitation and education offered to children at the region's young offenders institutions, heard nine children from the county were handed custodial sentences over the last year and the service wanted to reduce that further.
Mr Walker said: "We have never seen a child come out of custody better than they have gone in. It is, as the saying goes, an expensive way of making bad people worse.
"We want to further reduce the number of our children who are going into Wetherby Young Offenders Institution because it just isn't an appropriate place for vulnerable and damaged children. It can't offer therapeutic support or stability, it can't offer the quality of education and care that they need."
The meeting heard the youth justice service had launched a review to tackle "gaps and vulnerabilities" in communities across the county, to avert children reaching the criminal justice system.
"Clearly there is a major issue there about what we can do for the children in those communities to avoid them reaching that point.
"Fixing Scarborough's socio-economic issues is beyond the scope of a youth justice partnership. We can't organise economic regeneration or new motorways, but we do have to look at tailoring services better to address the kind of impacted generational deprivation which you often find in seaside towns in particular, but also outlying rural areas, such as the Catterick area."
Eastfield division councillor Tony Randerson described the youth justice report as "extremely disturbing", saying little appeared to have changed at young offenders institutions.
He said: "Generally, Scarborough has been the forgotten part of North Yorkshire. At the end of the day it's about resources. If the resources aren't there then things just aren't going to improve."
The meeting heard the review would include talking with youth justice colleagues in other seaside towns, such as Blackpool and Bridlington, but any service changes were unlikely to change the number of children becoming criminalised from Scarborough.
Mr Walker said: "You have got to do something, even if it seems almost hopeless.
"I think we have pulled up the ladder too much and there are people down at the bottom of the system who are now finding it very hard to find a better life. We need to do more and Scarborough is a critical place for that due to the level of exclusion, but Catterick is there and there are little villages up in the Dales that get a bus a week. It's not unique to Scarborough, it's just particularly bad and visible in Scarborough."