Government-funded anti-extremism projects must in future be targeted against those forms of terrorism which pose the greatest threat to national security, Home Secretary Theresa May has said.
Organisations previously funded by the £63 million annual anti-radicalisation budget have not been monitored closely enough and, in the worst cases, were "the very extremist organisations that Prevent should have been confronting".
The Prevent strategy, which was originally launched in 2007 to stop the growth of home-grown terrorism, "failed to tackle the extremist ideology that not only undermines the cohesion of our society, but also inspires would-be terrorists to seek to bring death and destruction to our towns and cities", Mrs May said.
A revised strategy, which has already been delayed due to Cabinet wranglings over the strength of the reforms, will see 25 areas in England - including Birmingham, Leicester, Luton, Manchester, Leeds and 16 London boroughs - targeted as priorities.
But Labour accused Mrs May of political "point-scoring", with shadow home secretary Yvette Cooper saying there was a gap between Mrs May's rhetoric and the reality of the Government's policy on terrorism.
The Home Secretary was "in for a fall" if she thought she could solve the problem without making any mistakes, Ms Cooper said.
Mrs May told MPs that, under the previous government, "in trying to reach out to those at risk of radicalisation, funding sometimes even reached the very extremist organisations that Prevent should have been confronting".
She said: "We will not make the same mistakes. In a world of scarce resources, it is clear that Prevent work must be targeted against those forms of terrorism which pose the greatest risk to our national security. Currently, the greatest threat comes from al Qaida, and those they inspire."
Prevent "must also recognise and tackle the insidious impact of non-violent extremism, which can create an atmosphere conducive to terrorism and can popularise views which terrorists exploit", she added.
Furthermore, funding would be removed from organisations that "do not support the values of democracy, human rights, equality before the law, participation in society".