HI Cressida
I've been involved with this lovely breed since 1985 and am besotted - you wont' regret having your Terv ;) :) Having said that, the youngsters can go through some very odd behavioural phases, and very often just when you feel you have sorted something out, they will react totally differently, having interpreted you in a different way to the way you wanted!

To a Terv, this kind of behaviour is very often because they are unsure, and they will use "offensive" behaviour to cover up their insecurity. Many young TErvs are a bit windy with strangers in some situations unless socialised very well - but a tip, when socialising, don't just reward for interracting well with humans; praise them for reacting appropriately to human body language. So if a human walks by and doesn't want to say Hallo, praise or treat for the youngster ignoring that particular human.
Some tend to show intense curiousity towards people out and about on a walk, (not so much along a street, more on a country walk where you meet strangers on occasion, that sort of scenario) which can unnerve those unused to dogs.
I agree the youngster needs to take his cue from you, so always appear confident to your dog. I would advise no very firm correction as such, because this will only convince the dog that approaching humans make his mum cross with him. He needs to learn confidence. If you can use a Halti do, but my current Terv bitch got very upset when she was the age of your youngster so althouhg i agree with Lara that it would help, you may find it difficult to put the advice into practice. Have him under control but not a tight lead.
I have found toy training worked wonders with my Terv bitch when she was going through a phase of "mugging" people. Although not the same problem, I suspect your youngster has the same reasons for his barking as my girl did for her mugging. I used a clicker too, but basically she was rewarded with the toy whenever the person or group of people had just gone past. It is the power of association: - the appearance of people = Good Things.
So it may help to get him fixated with a special toy that only comes out for very specila occasions, when he is very good and clever :) Don't over use it, but keep it as a special reward - but do play a few sessions first so he is excited by it. He must WANT that toy!!!
Start off on the lead, when people go past say "Good!" and immediately reward with toy, then use a long lead attached to harness (or collar if you are very careful - use it only for training) and eventually he should be trustworthy off lead. Keep this up for a long time, even when he seems OK. I highly recommend a toy to tug and chase, use his instincts and help him to relax, so try the good old Kong on a rope :)
All dogs are different but if you can get him fixed on the toy, he will start to like people approaching. Start somewhere where he will not be so stressed as to bark, so maybe just off a path where people walk, not actually where they approach him head on. Work out his "critical distance" and start from there. Gradually move the exercise more towards the "head on"situation.
After some time,when he knows to go past people, if he then still barks, you can use a word he may know to say "Er, excuse me fella but that is just not on". I use a sharp "ah ah" to do this if it is necessary. Timing is crucial and plenty of reward when he is even slightly good. As you will knowthey respond very well to voice control :)
My belief which seems to work well, is to show them what is required, train them, and then you can use the "Er excuse me!" scenario.
Agree too about the obedience advice and also ringcraft etc, but make sure he isnt forced to behave or it will only cover up his fear. He needs to learn confidence as I suspect lack of it is at the root of this problem.
If you can find a good agility class, (a bit early yet!) as he matures, this exercise does help to give dogs coinfidence in themselves and their environment.
Lastly, I would be interested to know his breeding :)
If this does not work please do feel free to email me on lindsay@do-wot.co.uk
Good luck with your beautiful boy ;)
Lindsay