At least 70,000 pupils skip school every day on average and government figures under-estimate truancy rates, research claims.
Sanctions should be used if necessary, Ruth Kelly says
A report from New Philanthropy Capital said the government had not improved truancy levels over the past 10 years despite spending £1bn on the problem.
But Education Secretary Ruth Kelly said the money had been well spent.
And she said local authorities should use every power available to them to reduce truancy.
The report claims official government figures "significantly under-estimate" the true scale of the problem because they use registration details as an indicator.
Two thirds of pupils admitted they were present for registration and then skipped particular lessons, the report said.
And it said a "plethora of government initiatives" had failed to improve unauthorised absence rates.
NPC, a charity that advises donors and funders on how to give more effectively, said permanent exclusions had risen by 20% since 2000.
It said league tables and more choice for parents over their child's schooling encouraged head teachers to expel more disruptive children.
And children who played truant or were excluded were more likely to face health problems or become involved in crime in the future.
Speaking to Radio 4's Today programme, head of research at New Philanthropy Capital Martin Brookes said truancy had 'flat-lined' over the past seven or eight years.
"Close to 1% of school days are lost through truanting and the level of exclusions is now on the rise - it reaches about 10,000 excluded each year.
"The government has spent over £1bn on this without any apparent, tangible progress to date. "
He said that some initiatives undertaken by charities were more effective because they tackled the underlying problems of truancy.
These charities could help by providing emotional and practical support which could be missing in their family lives, he went on.
"There is a big economic incentive for society to tackle this issue, quite apart from the human suffering involved," he said.
A separate report by campaign group Action on Rights for Children claimed truancy sweeps were an inefficient use of police time because two out of three children had legitimate reasons for not being in school.
The group surveyed 120 local education authorities and found more than 16,000 police hours were spent each year looking for truants, equivalent to a year's work for 10 police officers, according to the group.
But Ruth Kelly said measures such as fixed penalty notices were having a "marked effect".
Only a "tiny proportion" of the money which had been spent was on purely anti-truancy measures, with most spent on schemes such as learning mentors, to try to improve behaviour.
Ruth Kelly has defended the government's record on truancy
She said it was important to convey the message to parents that it was their responsibility to ensure their child attended school.
"Where local councils have taken the powers that the government has given them, for instance to impose a fine on parents or to force a parent to attend a parenting class, we've seen dramatic falls in the truancy levels," she said.
A spokesman for the Department of Education and Skills said overall school attendance was at record levels, and absences from secondary schools continued to fall with some 3,000 more pupils attending school each day compared to last year.
Over 11,500 parents were placed on the Fast Track to Prosecution scheme to improve their child's attendance within a term or face prosecution, the spokesman said.
But parents facing challenging circumstances would be supported.