Michael Gove has lashed out at "absurd" secrecy rules which may have left vulnerable children exposed to the threat posed by paedophile groups.
The Education Secretary said red tape surrounding children's homes prevented police being given basic information about youngsters, leaving them at risk of "gangs intent on exploiting these vulnerable children".
The Cabinet minister's 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 Mr 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, and is due to be published in full.
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, Mr Gove said he had met a "wall of silence" when he tried to find out about children's homes, with his department lacking basic information about location 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."
David Simmonds, the chairman of the Local Government Association's Children and Young People Board, said that councils are "not necessarily routinely notified" if a children's home opens in their area.
He told BBC Radio 4's Today programme: "If you are aware that there are issues in a local area with gangs, sexual exploitation and grooming going on, and a vulnerable child is being placed in that area, you may well be saying to the council from which that child has come `Actually this is not really a safe place for that child to come at the moment and you'd be better off looking for an alternative place'."
Information Commissioner Christopher Graham is writing to Mr Gove to "set straight any misunderstandings" about data protection law. His office said there was nothing in the legislation to prevent the protection of vulnerable children. A spokesman for the Information Commissioner's Office said: "This law covers information about people so it has no bearing on the disclosure of non-personal information like the location of care homes."