"We have to tell children 'you have done wrong', and if that means going through the court system that's what we have to do."
The flaw in the reasoning is that in this country being convicted and being wrong couldn't be further apart, and the idea of British law as a moral compass has been thoroughly discredited. Only a few bigoted special-interest groups, such as Mothers Against Murder and Aggression (MAMAA), still believe in this myth. If punishment makes good behaviour, we must be the best-behaved nation in the world.
Especially under New Labour, laws have been introduced with the sole purpose of being able to put more people in jail for longer, for 'crimes' that cause little or no harm to anyone. A person a few days past their 16th birthday can be jailed for having consensual relations with a person a few days before their 16th birthday. Someone can be jailed for possessing "extreme porn" involving consenting adults. A computer user can be jailed for forgetting the password to encrypted files. A scientist can be convicted of libel if he justly, and in the best interests of the public, criticises the quackery of chiroquacks.
Conversely, the police can end the lives of innocent people without being prosecuted. Police can harass people and hold them in custody for several days even if very clearly no offense has been committed. They can do this without risk of receiving a reprimand from their superiors, and in fact it seems harassment and arrest have now become standard tools for dealing with any kind of dissent, encouraged by the highest echelons of the state. (See for example: Video shows surveillance protesters bundled to ground by police; Guardian, Sunday 21 June 2009.) Big companies such as BT can snoop on internet users without bearing the consequences. One PM and one former PM who are both guilty of deceiving the public and leading the country into a disastrous war will likely never be prosecuted.
If one gives a 12 year old boy a criminal record for calling a girl a 'paki' one doesn't teach him that it is wrong to call a girl a 'paki'. Instead one teaches him that the state is ruthless in how it treats transgressions of mostly arbitrary norms. One should not be surprised if such a boy then grows up to be a banker or MP, robbing people's money in ways that happen to be legal, but abject nonetheless.