Most young people in local authority care are destined to end up in prison, homeless or working as prostitutes, a report by a think tank claims.
One-fifth of children leaving care end up homeless
Of the 6,000 who leave care each year, 4,500 will have no qualifications and a fifth will be homeless, says the study by the Centre for Policy Studies.
Report author Harriet Sergeant said the system was failing young people and society and perpetuating an underclass.
The government admitted that more needs to be done despite recent improvements.
In 2005, 60,900 children were in care with most placed with foster parents or in children's homes.
The report - entitled Handle with Care: an investigation into the care system - showed most were in care due to abuse or neglect (62%), family dysfunction (10%), absent parents (8%), and socially unacceptable behaviour (3%).
It also found:
within two years of leaving care 3,000 of 6,000 young people will be unemployed
2,100 will be mothers or pregnant
1,200 will be homeless
nearly half of all young people leave care at 16 or 17
Ms Sergeant said a childhood of abuse followed by an adolescence spent in care sets up young people for all the disadvantages that define social exclusion: illiteracy, homelessness, drug and alcohol dependency, prostitution and criminality.
"A successful system of care would transform this country, empty a third of our prisons and shift half of all prisoners under the age of 25 out of the criminal justice system.
"It would halve the number of prostitutes and homeless, and remove 80% of Big Issue sellers from our street corners."
The report said the problem is not the amount of money - the government spends £40,000 on each child - but the way it is spent.
It added that children were being moved "far too frequently" between carers, care homes focused on short-term containment rather than long-term success, and there was not enough support for charges once they had left the system.
It called for "secure, stable, long-term and loving care for difficult children".
Among the children quoted in the study was one 14-year-old girl who had been through 30 placements.
"You feel like a bit of rubbish yourself who no-one wants," she is quoted as saying.
Minister for Children Beverley Hughes said in some cases the system was compounding the young person's experiences.
She said a lack of accountability and a fragmented system were to blame.
"There is no single person doing what a good parent does for their own children, that is driving the system, making it work, making sure the health checks are done, making sure the schools are delivering," she said.
The Department for Education and Skills said it was working on a consultation document on a range of proposals to transform the outcomes of children in care.
The department said it would look at "how we can close the gap in the life chances and academic performance of looked after children and improve their prospects significantly".