At the Zacchaeus Centre - in the cavernous basement of a scarred Catholic church in Birmingham city centre - it is circle time. A group of children and adults are sitting around a low table on which trembles the small flame of a lit candle. “This is dumb,” smirks Luke, writhing on his chair, eyes shining. “But it’s kind of fun.”

Today’s topic is “my ideal school”. Luke says: “For lunch I’d like it to be McDonald’s and, after PE, shower cubicles instead of where all the boys can look at you.”

“My ideal school is where you don’t get battered but you can batter,” says Daniel. These may not be teacherly values, but the rules of circle time here are absolute - individuals can express themselves frankly without being judged (a possible component of an ideal school, you might think). Religious posters adorning the walls behind the children - “Let justice flow like water and integrity like an unfailing stream” - underline that the programme here for disruptive children is built not on the sandy American soil of tough love but the granite of the principle of forgiveness.

Born out of the teaching experience and religious conviction of its founder and director, Moyra Healy, the Zacchaeus Centre is the shared resource of a group of 10 Catholic secondary schools in Birmingham. Each can send one 11 to 14-year-old at risk of permanent exclusion for four weeks’ time out; the centre runs seven courses a year. Eighty-seven per cent of graduates of the Zacchaeus Centre return successfully to their own schools, says Moyra Healy; only four children out of 250 have ever been sent back to repeat the course.

As schools struggle simultaneously to raise standards and educate children with emotional and behavioural difficulties, the issue of permanent exclusion has become a focus for tension between headteachers and the Department for Education and Employment. The Government wants the number of permanent exclusions reduced by a third by 2002, a target many regard as unrealistic. But the schools minister, Jacqui Smith, threw a placatory bone to the Professional Association of Teachers conference this summer when she said appeal panels should not reinstate the most violent and disruptive.

None the less, the drive to reduce school exclusion - and hence reduce youth crime and long-term social exclusion - remains a priority for the DfEE; in March the Education Secretary, David Blunkett, announced that pound;47 million would be spent in the next two years to create 1,000 in-school support units. So it is no surprise that the work going on at the Zacchaeus Centre is arousing local and national interest.

Moyra Healy, 49, is a small, solid figure dressed in black. She wears a brooch, which might act as a focus for children unable to make eye contact. Despite her warmth, she has the pragmatism of someone who taught for 22 years in inner-city Birmingham. “We used to know on induction day (when 11-year-olds arrived from primary schools) who was going to cause trouble,” she says, “but we often left things so late that by Year 9 they were being excluded. I wanted to do something that was going to be preventive, and cost-effective.”

With support from her then headteacher, the local authority and the diocese, and after a year’s training in a pupil referral unit, Moyra Healy opened the Zacchaeus Centre in October 1995. Schools pay for the running costs, the Catholic church covers the rent and the LEA initially paid salaries for Moyra Healy and her deputy, John Manion. The DfEE now funds both posts plus - since last April - a third teacher, NQT Ben Daley. They are supported by volunteers and by placements from Newman College, a Birmingham teacher training institute.

Methods are now tried and tested. Following the initial referral from schools, Moyra Healy meets the child and his or her parents. “When parents hear that we’re going to care for their child and look after them, they can be very honest,” she says. “At first they say, ‘he’s no trouble at home’. Then two weeks later they say ‘he’s much better at home’. Parents gradually get to feel we’re on their side.”

Children have to agree to wear their school uniform and attend on time every day. The centre refuses to enrol anyone who doesn’t want to come. Only three children have ever been asked to leave - all, says Moyra Healy, because they were “inappropriate referrals”, in need of psychiatric help, not the mixture of behaviour management, counselling and compassion offered here. Mostly, though, schools have developed a good understanding of the type of pupils the centre can reach.

Children begin each of the four daily “lessons” with five points, which can be deducted - with difficulty - if rules are broken. Behavioural targets are realistic - for instance, getting up only three times in a lesson, gradually reduced to two. Children work towards gold, silver and bronze certificates each week, and take home daily progress reports. “We use the curriculum to practise good behaviour,” says Moyra Healy. “The content is less important than what actually happens in a lesson.”

It seems to mean something to the children - Year 9 boys have been known to cry over lost points and almost without exception children say they like coming here. Here, “attention-seeking” is recast as “attention-needing”; children are helped to look at why they react the way they do and given every chance to succeed. Aspirations may be modest; one child, hopes Moyra Healy, “may be able to change himself enough not to be noticed”.

The message teachers strive to get across to the children is that going wrong is not the end of the world. “We’re saying it doesn’t matter if you go wrong,” says Moyra Healy, “because we all go wrong. But you can begin again. Our children are all or nothing. You’re perfect or you’re a failure. It comes from their low-esteem.” This, she says, afflicts every child who walks through the door.

The inevitable flare-ups between children are put to practical use. When Damian and Ezra fall out with sudden heat over pound;5.99 lent to buy a laser pen, Damian is first into Moyra’s office to talk it over. He speaks freely, and she unpicks what’s behind his story. “Do you think it’s sensible to give other children money? Do you know you are a very generous boy?” Daniel makes complicated gestures with his hands. “I’m not really bothered about the money. At the end of the day it’s the thing of it, isn’t it Miss?” “The principle?” “Yes, Miss.” After extensive discussion, Ezra comes in and puts his case. It’s time-consuming and detailed, moral forensic science as they to and fro, sifting the evidence. And, instead of emerging from the office as victor and vanquished, both boys walk out with their dignity intact.

The most worrying children in this classroom are not the cheeky ones at the front, but the withdrawn ones at the back. Damian will be fine, you feel, if he can just get a job and a girlfriend. Ditto Ezra, rude and charming. But what of Mitchel and Tom, who don’t raise their eyes, who barely respond even to Moyra’s high-octane engagement. What kind of men will they make, carrying their silent tally of slights and injustices? “We worry about home situations,” says Moyra. “In the circle time, we hear a lot about physical abuse.”

The high success rate in returning children to school is of course due also to the schools. With five years’ experience, a shared ethos has been established between the centre and the schools it serves. Kevin Connolly, deputy head at Cardinal Newman, a 420-pupil, 11-16 school in special measures, has come to visit pupil Simona. She’s “more mature now”, she tells him, and has “broken out of her shell”. She’s looking forward to “a brand new start in Year 9”.

Kevin Connolly is enthusiastic about the centre. “Success in schools is measured in terms that these kids can’t aspire to,” he says. “Here, they are affirmed and when they come back they want to show their success, even the ones who have been really troublesome. It’s easier for us because there are certain things that faith demands of you as teachers in Catholic schools - recognising the spirituality of each human being, not putting people down, allowing children to explore the other sides of their being, sitting, talking about who we are.”

Moyra Healy was horrified when William Hague cited the Zacchaeus Centre as a model for his proposed “progress centres” - off-site exclusion units designed, he said, to let the majority of pupils get on with passing their exams. “It was a complete misunderstanding of what we are - which is an inclusion centre - an off-site inclusion centre,” says Moyra.

She believes Zacchaeus has succeeded because of its particular circumstances but that, in other contexts, in-school intensive workshops for key stage 3 pupils could be hugely effective and reach more children.

She hopes that the new money going to schools will not be spent on crisis management. “If we’re going to make schools better places for children and teachers we have to train everyone in how to create an atmosphere in the classroom which will minimise negative experiences. If we as teachers don’t teach these children, who will? And if the answer is nobody, what does that say about our society?” The inescapable truth that young people excluded from school are often excluded from almost everything else too was brought home recently when a former pupil, now an adult, turned up at Zacchaeus with his teeth through his lip. “Someone looked at me funny,” he told Moyra Healy. Why had he knocked on the red door of the Zacchaeus Centre? “There was nowhere else to go.”

Pupils’ names have been changed