Secrecy rules surrounding children in care homes might have helped paedophile groups to target them, Michael Gove has said.
The education secretary blasted the "absurd" rules, saying they could leave vulnerable children more exposed.
Gove said said police were not being given basic information about youngsters, leaving them at risk of "gangs intent on exploiting these vulnerable children".
His comments came as an in-depth report into England's children homes revealed councils spent an average of £4,000 a week to place a child in accommodation, with many sent far away from their local area - a practice Gove said was "indefensible".
The dossier of information was compiled in the wake of the Rochdale grooming scandal and found that 30% of homes fell below the Government's preferred minimum standard.
The Daily Telegraph reported that councils spent more than £1 billion a year to care for fewer than 4,900 children, with Bexley Council spending more than £3 million a child on specialist privately-run homes last year.
Writing in the newspaper, Gove said he had been met with a "wall of silence" when he tried to find out information about children's homes, with his department lacking basic information about their locations and who was responsible for them.
The regulator Ofsted was barred from giving information to the police by data protection rules and other "bewildering regulations", he said.
But he added: "There was one group of people, however, who did seem to possess all the information: the gangs intent on exploiting these vulnerable children.
"They knew where the homes were; they knew how to contact the children: at the fish and chip shop, the amusement arcade, in the local park, or just by hanging around outside the houses.
"In the name of 'protecting children' by officially 'protecting' their information we had ended up helping the very people we were supposed to be protecting them from.
"We shielded the children from the authorities who needed to be looking out for them."Mr Gove said almost half of the children were placed in homes outside their local authority area, with a third more than 20 miles away.
"That is indefensible," he said. "So, too, is the fact that more than half of children's homes are in areas with above-average crime levels."