Martin Rowson's cover illustration for New Humanist, May/June 2009From the surrounding hills, you can readily view the modern history of my home town of Blackburn. The cotton mills may have long since stopped working, but the minarets stand as concrete reminders of the waves of immigration, mostly from Pakistan and India, that those same mills attracted in the 1950s and '60s. Today such immigrants and their descendants make up a fifth of the town's population, and the locations of their 40 mosques highlight the self-selecting segregation that has taken place there in the past five decades. In run-down areas like Whalley Range, Audley and Bastwell, they stand among the terraced streets, where working-class Asian families live largely separated from the working-class white families of Shadsworth, Highercroft and Mill Hill. The middle classes, meanwhile, have largely abandoned Blackburn to its fate, moving out to the nearby Ribble Valley, where glorious countryside replaces urban grime. What's left is a borough listed in 2007 as the 17th most deprived in the country, a town in which unemployment even prior to the current economic crisis was well above the national average at 6.4 per cent, a town with low standards of education and health.

Into this unhappy mix comes the issue of Islamic extremism. When I visited in early April, emotions were running high over a recent police raid on a convoy of vehicles travelling on the local M65 motorway. Nine men from Blackburn and neighbouring Burnley were arrested under the Terrorism Act, but later released without charge when it was found they had simply been transporting aid bound for Gaza, donated by the local Muslim community. A week after my visit, two of the 12 men arrested in the latest high-profile terror raids were seized while working as security guards at a Homebase store in the nearby market town of Clitheroe. They too were released without charge - something many feel happens all too often - but at the time it was perhaps an indication of the continuing anxiety over home-grown terror, unleashed by the London bombings of 2005, that there was palpable relief not just that another possible plot had been foiled but that the suspects turned out to be Pakistani citizens with student visas, rather than local men.

Those arrests came at a time when the government had just unveiled its updated counter-terrorism strategy, the pithily named "Contest 2", which places much emphasis on the need to combat the emergence of home-grown terrorists. Of the four "Ps" that make up the strategy - "Pursue", "Prevent", "Protect" and "Prepare" - it is the Prevent element, with its stated aim of "stopping people becoming terrorists or supporting violent extremism", that has generated the most debate. The principle behind it is straightforward: through increased engagement with Britain's Muslim community, the government aims to ensure that its own citizens never again turn to terrorism. The strategy, however, has been widely criticised. A recent report by the right-leaning Policy Exchange think-tank, "Choosing Our Friends Wisely", accused the government of allocating funding to "Islamist-influenced organisations such as the United Kingdom Islamic Mission, the Muslim Council of Britain and the Islamic Society of Britain". Then, on the very same day as Contest 2 was published, a row broke out over Communities Secretary Hazel Blears' attempts to force the MCB to sack its deputy director-general Daud Abdullah after he signed a declaration urging support for Hamas. As Kenan Malik argues on page 34 of this magazine, multicultural policies have often led politicians to engage with self-appointed "community leaders", who often are unrepresentatively conservative, rather than the communities themselves. So, if a strategy such as Prevent is really to succeed, it must do so at a local level. How has the policy fared in the parts of the country it is hoped to influence?

Given its large Muslim population, Blackburn has perhaps unsurprisingly been the focus of a significant amount of Prevent work. Since the Department of Communities and Local Government launched its "Preventing violent extremism: winning hearts and minds" strategy in 2007, and with it the Preventing Violent Extremism (PVE) Pathfinder Fund, which earmarked an initial £6 million to be distributed among local authorities with sizable Muslim communities, Blackburn with Darwen council has so far been allocated £285,000 to be spent on PVE work. This is only the latest in a series of initiatives aimed at reducing extremism among Blackburn's Muslim community. As David Mallaby, Director of Neighbourhoods, Housing and Regeneration at the Council, pointed out to me, PVE projects in Blackburn have built on work that had been happening in the area since 2003, prompted by several high-profile terror arrests with links to the town. Saajid Badat, the accomplice of the failed "shoe-bomber" Richard Reid, had studied at an Islamic college in Blackburn, and the authorities moved quickly to address concern among locals. "Because of these arrests," Mallaby explained "the area attracted a great deal of media attention as far back as 2003-4. As a result we did a lot of work with the community around trust and reassurance, and the need for us all to work collaboratively. By the time PVE funding became available, we'd already built the foundations through that relationship." Mallaby chairs the Lancashire PVE Forum, which brings the police and local authorities together with community and faith representatives. At present there are 44 initiatives running to address the issue of extremism. Specific examples include College Voices, in which students at the local college are offered workshops "establishing legitimate means for expressing grievance . . . and group discussion of key issues of interest, including terrorism and foreign policy", and a Citizenship and GCSE programme, "aimed at tackling under-achievement of Year Nine Pakistani boys and addressing citizenship issues."

Mallaby claims some success for these projects, and says there is independent evaluation to support that. He argues that they have built a foundation of trust between local people and the local authorities, which allows PVE projects to complement the high-profile "Pursuit" work carried out by the police. But do local Muslims share Mallaby's optimism? Bano Murtuja, who runs a consultancy specialising in community engagement, argues that despite some minor successes the overall tone of the preventing extremism strategy has served to alienate many Muslims. "This carte blanche painting of the community as potential terrorists has to be removed completely from the scene," she said. "It is a ridiculous premise. The actions of four individuals on 7/7 have come to define two million people. Now everything Muslim-related is extremism-related. So if I'm sick, or my child isn't surviving childbirth, that in some way will be extremism-related? If you're a Muslim organisation looking for funding, it has to be about extremism."

Murtuja has turned down significant funding because of this focus, and says others in the area have done the same. Some who have taken part in the initiative share her reservations. In 2007 Anjum Anwar became the first Muslim to be employed by the Church of England when she became Blackburn Cathedral's Dialogue Development Officer. Together with Canon Chris Chivers she runs exChange, the diocese's community cohesion and interfaith programme. In the past year they have used £20,000 of PVE money to run workshops for young people, in which terrorism and extremism are debated, but they remain strongly critical of the government's approach. "PVE is not a well thought-out agenda," said Anwar. "They think they can buy off Muslims and the problem will go away. So people have backed off, and they have the right to do that. If a large chunk of a community refuses to dialogue with you on an initiative aimed at that community, then that initiative isn't working."

Chris Chivers sees PVE as a short-term fix - a sticking plaster - and, just like David Mallaby, stresses that such work has to be built on pre-existing relationships. "You can't just suddenly zap people in to deal with a problem, and that's what's happening," he explained. "And then of course people stick two fingers up and say they're not interested. That's inevitable, because why would you want to talk about one of the most difficult issues if you don't really know the people you're talking to. We have a better chance of being successful because we've already built up relationships with lots of young people across Lancashire, allowing us to deal with some really difficult issues, including Islamic extremism."

For the Lancashire Council of Mosques, the wording of the PVE strategy has also proved hugely problematic and, while they continue to sit on the local PVE Forum, they have decided against using funding they had initially agreed to take. "This is not targeted work," says the Council's chair Abdul Hamid Quereshi. "It's too broad. Many feel it implies that all of the Muslim community is actually extremist." The Council's concerns were reinforced when a draft of Contest 2 was leaked in the national press earlier this year. The Guardian reported that the new strategy would widen the definition of "extremism" to include anyone advocating Sharia law or the idea of a Caliphate, as well as those who argue that homosexuality goes against Islam. In the end the document was less specific, with Home Secretary Jacqui Smith speaking of the need to mount a "civil challenge" to those acting "in a way that undermines our belief in this country, in democracy, in human rights, in tolerance, and free speech". But Quereshi still feels the policy can only serve to further alienate British Muslims. "People have started to feel that Contest and PVE were from the beginning taking Muslims step by step towards denouncing their faith. At first it was about only targeting extremists, but the definition of that has broadened so much that any activity you do could be taken as extremism. Of course you need to spend money on security, but taking a blanket approach towards every member of the Muslim community is wrong, a fallacy and a waste of resources. Because you are delivering something to people who really don't know anything about extremism or terrorism."

So if the PVE agenda has failed to capture the support of British Muslims, what should the government be doing to counter the threat of home-grown extremism? In his new book How to Win a Cosmic War: Confronting Radical Islam, the Iranian-American writer Reza Aslan argues that, while religious in character, Global Jihadism must be seen as a social movement like any other, fuelled by a combination of local and global grievances. The hardcore Jihadists "cannot be negotiated with because they want nothing - at least, nothing this world can offer them", but their ability to mobilise wider support rests firmly on worldly concerns.

As Aslan writes, the Jihadists construct a "master frame" for potential recruits, whereby "the global grievances to which they have been exposed are connected to the local grievances that they themselves experience every day." Visiting the Beeston area of Leeds, infamous as the home of three of the London bombers, Aslan observed these local grievances among young Muslims. "What I saw," he told me, "was what one sees in any of the large ethnic enclaves throughout Europe, which is a community that is in some sense self-isolated, that feels as though they are under siege. The younger generation were born in the UK, and in many ways feel just as British as anyone else, but because of their names, or the colour of their skin, they feel as though they are set apart from the rest of society, that society sees them as somehow less British. Because of all that there's an enormous amount of resentment and anger, and incredible mistrust of the authorities."

Aslan believes the British government is far ahead of its European counterparts in terms of its engagement with its Muslim citizens, although he can see why people are suspicious of a policy that works specifically in terms of preventing extremism. "Words matter," he says, "and the way you talk about these issues matters. For the most part the Muslims I spoke to in Europe all said the same thing - what they want to try and combat is the turn to violence, but terms like 'radicalism' or 'extremism' really rub Muslims up the wrong way, because they're being defined not by Muslims but by outsiders." So what are the alternatives to specific schemes like PVE? "There is a marked difference between government programmes whose purpose is to engage with the Muslim community, to help lift them up socially and politically, and those whose purpose is to prevent something. What a lot of Muslims would say is that we need to focus not just on the very real socio-economic issues that make Muslims in Europe feel marginalised and alienated, but also on the larger issue of identity, which is a problem for British society as a whole. If the British themselves can't figure out what it means to be British, what hope does a Pakistani immigrant have?"

This problem with identity provides those looking to radicalise young Muslims with the opportunity to forge the link between local and global grievances. "When you're in a situation where you feel as though your national identity is irrelevant it's only natural, particularly in this time of globalisation, for people's identities to expand beyond their nation states and revert to more primal identities, the most effective of which is religion. So what is happening is that British Muslims are becoming more comfortable connecting themselves to the Iraqis, or the Palestinians, than they are to their fellow Britons. And when they then see British foreign policy being detrimental to Muslims abroad, then that's the powder keg." It is at this point that Jihadists are able to link the local and the global. "It's a genius way of creating an identity," explains Aslan. "Why can't a 19-year-old Pakistani kid in Leeds get a job? Well, it's the same reason why Palestinians can't have a state, or the same reason why there are innocent Muslims wasting away in Guantanamo. It's all one single master narrative, a connection between local and global concerns that creates an identity that goes beyond any kind of ethnic or national boundaries. Frankly it even goes beyond specific religious boundaries, because Islam is the most eclectic religion in the world. It's not specifically religion, but a sense of grievance that binds these communities together."

All those I spoke to in Blackburn stressed the key role British foreign policy has played in alienating Muslims, although, as Aslan pointed out, "while it may actually be true to say that changing your foreign policy will lead to peace at home, it's simply not going to happen in that way." In short, a dramatic shift in foreign policy is not a realistic prospect and therefore the emphasis needs to be on addressing the local, something Aslan illustrates by comparing Britain with the United States, where home-grown Islamic extremism has barely been an issue. He cites two clear reasons for this. Firstly, Muslims in America are far better off than their European counterparts, enjoying a median income above that of non-Muslims, and secondly they have had less difficulty with issues of identity and integration. "As upset as American Muslims are with American foreign policy," says Aslan, "our primary sense of identity is not so much connected to that of the kid living on a garbage heap in Gaza. We do not define ourselves primarily in transnational terms but in national terms because, to be perfectly frank, it's an incredibly easy thing to do in the United States. The national identity here is so malleable, so easily absorbed into a host of different cultural, ethnic and even religious traditions that very few Muslims in the US would say that they don't feel American. So the key is to create a strong enough sense of identity and integration into society so that anger at foreign policy is delinked from one's own sense of identity. That is the challenge for the UK."

And that challenge of identity is hardly one unique to Muslims. Attempts to promote a British national identity have appeared just as confused as those to tackle extremism. While violent Jihadists, as Aslan says, have proved hugely effective communicators of identity, government efforts to advance an alternative have been limited to token statements on "citizenship" and promises to reclaim the Union flag from the far right and to institute a new day in celebration of "Britishness", initiatives unlikely to lure young people away from the pub, let alone the Jihadi website.

"Many of the young people we meet don't have the linguistic building blocks to discuss issues like extremism," says Chris Chivers. "How can you set terrorism against democracy if you don't know the nature of democracy? You have to start with the nature of citizenship. And I don't mean these half-baked initiatives on 'what does it mean to be British?' The answer to that is 'nothing'. But it might mean something to be a citizen. If we run that as a stream through education, that citizenship is one of the products we want people to come out with at the end of full-time education, then as a part of that you would be able to address what it then means not to work within those structures and to choose a different method of engagement, and why that might be wrong."

With citizenship comes the notion of having a voice in society, something Bano Murtuja believes young people of all ethnic backgrounds are denied. "At the moment, young people are learning that violence is an option, partly becuase they are constantly being told that they are, or people are scared that they will become, violent. The expectation for many kids is that they will end up with ASBOs; for other ethnic minorities it is knife crime, for Muslims the anxieties are all about Islamic radicalism. Those are the messages we convey to them on a daily basis. The problem is the fear that these kids will become violent also serves to present violence as an option. The government itself is radicalising Muslim youth.

"What we need is a complete change in tactics. We're not going to change our policy on Iraq and Afghanistan, nor should we. We screwed up those countries and it's our moral responsibility to sort them out. But we need to stop saying to kids who are angry, 'You're all going to become terrorists', and start saying, 'I hear you're vexed. Let's sit down and talk about it.'"

The disaffected youth who so struggle with identity often come from relatively deprived backgrounds, and in this respect the contrast between the US and UK Muslim communities that Aslan identifies could not be clearer than in Blackburn. "Muslims are from the 88 most socio-economically deprived wards in the country," says Murtuja. "So why isn't the government looking at education and health? The Muslim community is the youngest in the country, with the highest birthrate, so over the next 15 years a massive proportion of the British workforce will be drawn from that community. This requires the government to put resources into education, but they're failing to do that. Rather than putting money into the education of Muslims for the sake of education, they're doing it solely to prevent them becoming terrorists."

As a policy designed to address extremist violence, it is very difficult to judge whether PVE is working. The local authorities in Blackburn feel their initiatives have been successful, but perhaps ultimately the only way of measuring if the public is safer as a result is in terms of the number of home-grown attacks carried out. In this sense we have been safe since 7/7, yet the government seemingly contradicts this by constantly reminding its citizens of the threat from British extremists.

But if we are to view PVE not just as a means of tackling extremism but as a way of addressing the social malaise affecting Britain's multicultural towns, it seems clear that it is not working - if a policy aimed at Muslims has the effect of alienating Muslims, how can it be seen as a success? Visiting a town like Blackburn, it's easy to see why young Muslims might be so ready to embrace the forms of global identity Reza Aslan describes. What is the alternative? British national identity, whatever that may be, lacks any appeal, while poverty and segregation undermine the hope of forging a sense of local pride. Sitting in the crowd watching Blackburn Rovers, our beleaguered football team, play Tottenham Hotspur during the week I was in town, that segregation is all too clear. The club have tried hard to drive up support from the local Asian population, but to little effect. The town's Asian and white communities are living largely separate lives, and both are struggling with education, health and employment. Address those local grievances, and the extremists' task of creating a master narrative which ends in martyrdom becomes much harder.

How to Win a Cosmic War by Reza Aslan is published in May by William Heinemann