Probation officers and a private company supervising the tagging scheme are condemned in the report by Her Majesty's Inspectorate of Probation (HMIP) for allowing Peter Williams, a cocaine addict, to remove his tag and breach the terms of his release on licence 20 days before he murdered Marian Bates.
Mrs Bates's husband, Victor, 66, said the report exposed the incompetence of those in charge of the case.
The murder of Mrs Bates, 64, who was shot dead in 2003 in her family shop as she tried to shield her daughter, Xanthe, from armed robbers, caused a public outcry.
Mr Bates said the report was "a complete whitewash - everybody is incompetent, but nobody is to blame".
He said: "He [Williams] was a serial breaker of every condition that they put on him, yet they kept letting him out. It shows that tagging does no good whatsoever. He should never have been out of custody.
"It is a collective failure of the system, of the youth offending team, of the untrained staff and of the tagging system - which is a complete waste of time."
David Davis, the shadow Home Secretary, said: "The Government should recognise that tagging is not a substitute for prison and is extremely risky when the criminals are dangerous."
The HMIP found that in the 20 days leading up to Mrs Bates's murder, Williams had failed to attend meetings with youth and drug workers, education staff and the police, which should have resulted in his return to custody. Williams, now 19, had also breached a curfew order - which was supposed to be enforced by his tag - on at least six occasions.
However, the private monitoring company Premier failed to inform his youth offending team (YOT) of this until the morning of Mrs Bates's murder, by which time he had removed the tag completely.
The inspectors also discovered that his case manager was "inexperienced" and had no formal qualifications in youth work, social work or probation.
The YOT and case manager should have acted sooner when it became obvious Williams was in breach of the terms of his licence, the report said.
The chief inspector of probation, Andrew Bridges, said: "The YOT would have done their job properly if the case manager had identified when Williams was in breach and had acted on it.
"Furthermore, her managers did not supervise her work effectively enough. Finally, the fact that Premier failed to notify the YOT of Williams's curfew breaches shows that they had an inadequate understanding of their responsibilities."
Baroness Scotland of Asthal, the Home Office minister, said: "We must now strengthen our procedures urgently ... and do as much as possible to avoid similar incidents occurring in the future."Reuse content