Counterterrorism police have targeted hundreds of surveillance cameras on two Muslim areas of Birmingham, enabling them to track the precise movements of people entering and leaving the neighbourhoods.

The project has principally been sold to locals as an attempt to combat antisocial behaviour, vehicle crime and drug dealing in the area. But the cameras have been paid for by a £3m grant from a government fund, the Terrorism and Allied Matters Fund, which is administered by the Association of Chief Police Officers.

About 150 automatic numberplate recognition (ANPR) cameras have been installed in Washwood Heath and Sparkbrook in recent months. Birmingham's two predominantly Muslim suburbs will be covered by three times more ANPR cameras than are used to monitor the entire city centre. They include about 40 cameras classed as "covert", meaning they have been concealed from public view.

The funding arrangement was not made clear to the handful of councillors who were briefed that the cameras would appear in their area. Instead, they were told only that the money had come from the Home Office. "I raised my concern then: is this really about spying?" said Salma Yaqoob, a member of the Respect party and councillor for Sparkbrook.

"The terrorism aspect was certainly not emphasised in that meeting. In fact it was me having to be portrayed as the awkward squad, or even paranoid, for even raising the issue of whether this was really about counterterrorism. They were very much saying, 'No, this is about burglary and crime.'"

The criteria for TAM funds state clearly that a police force must prove a project will "deter or prevent terrorism or help to prosecute those responsible".

Police sources said the initiative, code-named Project Champion, is the first of its kind in the UK that seeks to monitor a population seen as "at risk" of extremism.

When the cameras become operative, residents will not be able to drive into or leave the two neighbourhoods without their movements being tracked.

Officials maintain the cameras will prove useful for tackling a whole range crime. The areas were ringfenced for intense surveillance in 2007 after a police investigation into a suspected plot to kidnap and kill a British soldier in the area.

The Safer Birmingham Partnership, a joint initiative between police and the local authority which will run the cameras, expressed "regret" there had not been fuller consultation. Senior SBP officials said they only became aware that the cameras were paid for by counterterrorism funds as a result of Guardian inquiries.

Jackie Russell, the director of the partnership, said: "Just because the funding has an interest in counterterrorism doesn't mean that for us, that is our focus. For us, it is about community safety."

Steve Jolly, a local activist leading a campaign to have the cameras removed, called on the deputy prime minister to intervene: "Nick Clegg has made a real point of emphatically drawing attention to the surveillance society and promising to stop unnecessary infringements of privacy," he said. "I think we should hold him to his word, and say, 'Look at what is happening in Birmingham – are you going to allow it to go ahead?'"