Speaking at a debate on the future of fostering, hosted by the Fostering Network, the founder of think tank the Centre for Social Justice said the disproportionate number of children in care and care leavers in the criminal justice system was an indictment on local authorities.
He said: "Local authorities have got away with murder over the last 20 years. They have been able to do as little as possible. They feel if they defer it long enough the criminal justice system will pick up the cost.
"Far too many children are shunted across to the criminal justice system. It is more expensive this way but because local authorities don't hold the budget they don't care."
Referring to the Couldn't Care Less study he conducted with Labour MP Graham Allen, in 2008, he said local authorities should take on the cost of youth custody.
Duncan Smith also reiterated his support for investing in early intervention saying: "In the next election we may at last have a clear and strong statement from the parties on their commitment to early intervention.
"I have met with the all three party leaders and urged that we at least get a meeting of minds across the manifestos."
Last year, Tory leader David Cameron announced that Duncan Smith would be given the role of mending Britain's "broken society" under a Conservative government.
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