Children are being pushed towards violent street gangs by a social care system that focuses money on a small number of the most serious cases, the Children's Commissioner for England has warned.
A report commissioned by Anne Longfield found that £4.3 billion - around half of the children's services budget in England - was spent on just 73,000 children last year.
In contrast the other half of the £8.6 billion funding was covering programmes for 11.7 million children, the analysis by the Institute for Fiscal Studies showed.
It came as Mrs Longfield also warned of the need to tackle addictive algorithms used by social media firms, which risk keeping children hooked on the internet.
"It's set up to keep us dependent, and part of what I hope to see in the next phase is to break that dependency so that children have the chance to make positive, informed choices about what they do when they are on it," she told the Telegraph.
"I would remove algorithms from any content for children up to the age of 15."
The report was released on Tuesday at a time when gang violence is in the spotlight after a wave of shooting and stabbing murders in London, sparking a debate on police numbers and help for children and families.
Public Spending on Children in England: 2000 to 2020, found that while the overall level of public spending on children has been maintained over the last two decades, almost three quarters (72%) of children's services budgets were now focused on "those in severe need".
It revealed that the number of emergency care cases, and money spent, rose sharply following the Baby P scandal in 2007.
Baby P - Peter Connelly - died after months of abuse at the hands of his mother Tracey Connelly, her boyfriend Steven Barker, and his brother Jason Owen, despite being on the at-risk register and receiving 60 visits from social workers, police and health professionals over eight months.
The report found that because councils had a legal duty to run often high-cost "responsive" schemes at a time of local authority budget squeezes, funding for more preventative measures that were often optional had been cut.
Mrs Longfield warned that the economic and social cost of this was "unsustainable" and called for the Government to make changes in 2019's Spending Review.
She said: "While every child should receive the support they need, the economic and social costs of this current strategy are unsustainable.
"The cost to the state is ultimately greater than it should be and the cost to those vulnerable children missing out on support will last a lifetime.
"Every day we are seeing the consequences of helping children too late - in pressures on the family courts system, special schools and the care system and in the spiralling numbers of school exclusions and the consequent increase in younger and younger children linked to violent street gangs.
"I hope this analysis will help to move the debate on from one simply about the amount we spend on children, to a debate about how we spend it."
The report found that the number of Looked After Children (LAC) cases, those in residential or foster care, or being handled by adoption services, rose from 60,000 in 2008 to 73,000 last year.
Between the 2009-2010 and 2016-2017 financial year spending on LACs rose by 22%, the report found.
But at the same time, spending on Sure Start and "young people's services" fell by about 60% over the same period, from £1.7 billion to £0.7 billion and £1.4 billion to £0.5 billion respectively.
It noted: "Existing evidence already suggests that children with the most complex needs tend to come into care at a later age, and subsequently have the most costly care pathways, whilst many preventative services tend to be lower cost in the long run.
"Thus, the reduction in spending on programmes such as Sure Start and young people's services could push up costs in the long run."
Some 30% of children were deemed as living in poverty in 2016-2017, the report added, compared to 16% of pensioners.
On Monday, Mayor of London Sadiq Khan urged Home Secretary Sajid Javid to immediately make good on his pledge to secure extra funding for the police force.
The Metropolitan Police has launched 74 homicide investigations since the beginning of 2018 - sparking fears that this could be the bloodiest year in the capital for more than a decade.
Sadiq Khan said waiting for the Government's comprehensive spending review next year would be too late as the Met struggles with escalating gun and knife crime.
Councillor Richard Watts, chairman of the Local Government Association's children and young people board, said: "Councils across the country have worked incredibly hard to protect funding for the most vulnerable in our communities despite significant and ongoing government funding cuts, and continue to provide essential help and support for thousands of children and families every day.
"However this report paints a stark picture of the reality facing councils, who cannot keep providing this standard of support without being forced to take difficult decisions and cut back on early intervention services which help to prevent children entering the care system in the first place."
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