PRIME Minister David Cameron has condemned Britain's long-standing policy of multiculturalism as a failure, calling for better integration of young Muslims to combat home-grown extremism.

In a speech to the Munich Security Conference, Mr Cameron signalled a marked change in policy towards Britain's ethnic and religious minorities, saying the "hands-off tolerance" of those who reject Western values has failed.

He urged a "more active, muscular liberalism" where equal rights, the rule of law, freedom of speech and democracy are actively promoted to create a stronger national identity.

"If we are to defeat this threat, I believe it's time to turn the page on the failed policies of the past," he said.

It was Mr Cameron's first major speech on Islamist extremism, an issue of major concern for British governments ever since four home-grown suicide bombers attacked the London transport system in 2005, killing 52 people.

The Prime Minister, who took power last May, argued that "under the doctrine of state multiculturalism, we have encouraged different cultures to live separate lives, apart from each other and the mainstream".

He said this had resulted in a lack of national identity in Britain which had made some young Muslims turn to extremist ideology.

"Frankly, we need a lot less of the passive tolerance of recent years and much more active, muscular liberalism," Mr Cameron said.

"A passively tolerant society says to its citizens: as long as you obey the law, we will leave you alone. It stands neutral between different values.

"A genuinely liberal country does much more. It believes in certain values and actively promotes them.... It says to its citizens: this is what defines us as a society."

Mr Cameron clearly distinguished between Islam the religion and the political ideology of Islamist extremism, saying they "are not the same thing".

But he argued that non-violent organisations which present themselves as a gateway to the Muslim community but are ambiguous on Western values should no longer receive state funding, and should be banned from university campuses.

His speech echoed controversial remarks made by German Chancellor Angela Merkel last year, when she also called multiculturalism a failure, saying Germany had not devoted enough attention to the integration of immigrants.

"What I mean to say is that for years, for decades, the approach was that integration was not something that needed to be addressed, that people would live side-by-side and that it would sort itself out," Ms Merkel said in November.

"This turned out to be false."