Britain's students have rejected government cash for a project to improve relations between different ethnic and religious groups on campuses, on the grounds that it is an attempt to impose the prime minister's controversial counter-extremism agenda.

Last week, David Cameron unveiled his plan to tackle "entryism" in the public sector by rooting out people holding "extremist" views, a policy attacked by the Muslim Council of Britain for "McCarthyist undertones".

Now it has emerged that the government's crackdown on "non-violent extremism" has also led to division between the National Union of Students and ministers over a six-year project funded by the Department for Business Innovation and Skills (BIS). The Campus Cohesion, Faith and Belief programme sought to bring different faith groups together and encouraged and funded the training of university staff on how to mitigate risks posed by external speakers.

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