The cash will fund initiatives to help tackle extremism by empowering community leaders to stop radicalisers from taking advantage of vulnerable young people.
Hazel Blears, communities secretary, made the announcement yesterday as a report into the success of projects tackling extremism was launched.
Preventing Violent Extremism Pathfinder Fund: Mapping of Project Activities 2007/08 evaluated 261 projects working with young people.
It concluded that while the majority of areas will continue to produce good work, a small minority of local authorities will need "significant" efforts to get their work up to scratch.
It says they will have to develop more distinct responses and go further in their work to confront and isolate violent extremism.
Researchers found that role play activities, for example around a fictitious terrorist incident, involving a range of public sector partners and community members, were an effective way of engaging with a wide range of stakeholders.
However, they found that there was an "insufficient" focus on further education and higher education, despite awareness that educational institutions could be a potential source of recruitment for extremist activities.
Blears said: "Building community cohesion is not the cure-all in protecting vulnerable young people or wider society from the threat of violent extremism. That means working with the whole community and a focus on shared values alongside activity targeted specifically at individuals who are most at risk."
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