The Prevent programme designed to counter violent extremism has been criticised by a committee of MPs.
It has stigmatised and alienated those it is most important to engage, and tainted many positive community cohesion projects, the communities and local government committee said.
It concluded that government's strategy to limit the development of violent extremism in the UK sits poorly within a counter-terrorism strategy.
"Many witnesses made plain they believe Prevent has been used to 'spy' on Muslim communities," said committee chair Phyllis Starkey.
"The misuse of terms such as 'intelligence gathering' amongst Prevent partners has clearly discredited the programme and fed distrust.
"Information required to manage Prevent has been confused with intelligence gathering undertaken by the police to combat crime and surveillance used by the security services to actively pursue terrorism suspects.
"These allegations of spying under Prevent will retain widespread credibility within some communities until the government commissions an independent investigation into the allegations."
The committee said a targeted strategy is needed to address the contemporary al-Qaeda-inspired terrorist threat.
"Much of the positive work undertaken by CLG - to promote better community cohesion and to curb social exclusion - has been tainted by association with the counter-terrorism agenda," said Dr Starkey.
"Any decision to widen the Prevent programme would only make this problem worse.
"A different approach must be taken. All the elements currently within Prevent which have a clear role in crime prevention should be brought under the remit of the home office."
To improve Prevent, the committee calls on the government to:
• Apply a more clearly risk-based approach to tackling all kinds of extremism.
• Update the CONTEST strategy (and guidance) to reflect recent research and
intelligence on the factors associated with the pathways to radicalization and extremist violence. Commit to completing a regular review of this evidence base.
• Revisit a recommendation made by the Commission on Integration and Cohesion (Our Shared Future, 2006) for a central 'Rebuttal Unit' to help local authorities tackle all extremist myths with accurate facts.
• Strengthen information sharing between local partners to ensure local authorities have vital information required to decide which organisations should be funded under Prevent.
• Provide much more training and support to front line workers such as council staff, police, teachers and youth workers.
• Make available a proportion of funding currently provided through Prevent specifically to projects aimed at encouraging direct participation in democratic means of debate.
• Recognise explicitly the long-term value to the UK Counter-Terrorism strategy of projects designed to improve understanding between people of different cultures and religious groupings.
