Nearly £1bn has been spent on the electronic tagging of criminals over the past 13 years with little effect on cutting offending rates, offering little value for money and serving only to enrich two or three private security companies, one of which is G4S, a senior police officer has claimed.

Chris Miller, a former expert on tagging at the Association of Chief Police Officers, who stood down as Hertfordshire's assistant chief constable last year, said that much of the potential of electronic monitoring to keep communities safe in Britain has not been realised.

"The current contracting arrangements for electronic monitoring have all but squeezed innovation out of the picture and stifled progress," he writes in a foreword to a report by the Policy Exchange thinktank published on Monday.

"Electronic tag technology used in most cases today is hardly any different from what it was in 1989, when it was first used in the UK. The future arrangements must not be allowed to continue to hold us back," writes Miller. He says the problem has centred on a "sclerotic, centrally controlled, top-down system that has enriched two or three large suppliers, that lacks the innovation and flexibility of international comparators and that fails to demonstrate either that it is value for money or that it does anything to reduce offending".

The Ministry of Justice has spent £963m on tagging contracts over the past 13 years. Two companies, Serco and G4S, have taken the bulk of the work, putting ankle and wrist tags on more than 100,000 offenders every year, mainly to monitor their compliance with night-time curfew orders which do little to cut reoffending during the day.

Ministry officials are about to invite bids for contracts for the next nine years, thought to be worth up to £3bn. The Policy Exchange report, Future of Corrections, says one in four police forces regards electronic tagging as ineffective.

"In the US there are a number of localised suppliers, meaning that the police and probation service are given the most up to date GPS technology to track the movements of a criminal 24/7," said Rory Geoghegan, the report's author.

He said in the US ankle bracelets had become smaller, smarter and more durable and were GPS-enabled so that police can pinpoint offenders' locations at all times, but the lack of competition in Britain meant the taxpayer was losing out.

"We desperately need to create a real market so that the police can get the technology they need to cut burglary, cut robbery and other crimes that have a massive impact on victims and community," he said.

Miller said that, as Hertfordshire's head of crime, he had tried satellite tracking technology for prolific offenders, polygraph testing of internet child pornography users, and alcohol diversion programmes for those caught drunk in public places. But each initiative had been greeted in Whitehall with reactions ranging from incredulity to downright obstruction.

The Policy Exchange pamphlet argues that the police and crime commissioners due to be elected in November should be given the power to decide how much money, if any, is spent on tagging and who should provide the services.