Speaking at the launch of his "Let's Talk" initiative, the Prime Minister said the Government should get more for the pound;2 billion it spends on children in care.
Mr Blair admitted Labour policies have failed to do enough to improve the lives of socially excluded children. Official figures show only 6 per cent of children in care gain five or more A*-C grade GCSEs and more than a third are not entered for a single GCSE.
Mr Blair's comments come a week after The TES launched its Time to Care manifesto to improve the education of children looked after by local authorities.
The manifesto calls for children in care to be given the right to private tuition to help them prepare for exams, extra resources for the schools which teach them and improved pay and training for foster carers.
The Government promised in March that all children in care would be guaranteed a place at their first-choice school after The TES exposed evidence they were missing out on places at the best.
A Department for Education and Skills spokesman this week confirmed that promise would include places at academies, despite the fact they do not have to abide by normal admission rules.
Mr Blair was speaking to public - sector professionals, Labour members and private-sector managers at an event which is part of the consultation process ahead of Labour's next manifesto.
He admitted the multi-billion pound SureStart scheme for under-fives had failed to reach the most disadvantaged families, and said he had always had doubts it would. The scheme has been championed by Gordon Brown, the Chancellor.
"If we are frank about it, there is a group of people who have been shut out against society's mainstream and we have not yet found a way of bringing them properly in," Mr Blair said. "Sure Start has been brilliant for those people who have in their own minds decided they want to participate. But hard-to-reach families are not going to come to places like Sure Start."