Muslim organizations that don't defend core British values and don't take a stand against extremism will lose millions of pounds of Government funding
Ruth Kelly, the Communities Secretary, said it was time for a "fundamental rebalancing" of relations with Muslim organisations if a new generation of terrorists was not to grow up in this country.
The tough new approach would involve shifting grants towards those organisations which accepted and promoted a set of "non-negotiable values" including respect for the law and freedom of speech.
"It is only by defending our values that we will prevent extremists radicalising future generations of terrorists," Miss Kelly said in a speech to Muslim groups in London.
In an apparent threat to the Muslim Council of Britain (MCB), the umbrella group for Muslims which has received more than £200,000 from Government in the past two years, Miss Kelly highlighted its refusal to take part in Holocaust Memorial Day.
"I can't help wondering why those in leadership positions who say they want to achieve religious tolerance and a cohesive society would choose to boycott an event which marks, above all, our common humanity and respect for each other," she said.
The Council has not taken part in the event, arguing it should be expanded to cover all genocides.
Inayat Bunglawala, the assistant general secretary of the MCB, accused the Government of trying to coax Muslim groups to back its unpopular foreign policies.
"If the Government is planning to merely seek out those organisations who will be less critical or parrot its policies, then this is not a strategy that will succeed. If that happens, the Government will lose credibility with the Muslim community."
Miss Kelly's department alone allocates around £9 million a year to faith groups — much of it to Muslim organisations.
Her comments are the latest in a new effort by Labour ministers to tackle sensitive religious and cultural issues previously regarded as politically "off limits" for the party.
Yesterday two other Labour ministers weighed into the debate over whether Muslim women should have a right to wear veils.
Harriet Harman, the constitutional affairs minister, denounced veils as an obstacle to female participation in society. She argued that doing so would be an obstacle to standing for Parliament. "If you want equality, you have to be in society, not hidden away from it," Miss Harman told the New Statesman.
Bill Rammell, the higher education minister, backed universities that banned face veils.
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