British government has announced an inquiry into the use by police of stop-and-search powers and warned that a generation of young Muslims was being alienated by "Islamophobic" policing.

Home Office figures released yesterday revealed the number of Asians stopped and searched under anti-terrorism laws has increased by 302 per cent in a year.

Reflecting fears of an Al Qaeda attack in Britain, stop and searches under terrorism legislation leapt from 8,550 in 2001-2002 to 21,577 in 2002-2003, according to Home Office.

Asians experienced the biggest increase, from 744 to 2989, a rise of 302 per cent, while stop and searches under the Terrorism Act of white people rose by 118 per cent, from 6,629 to 14,429, and by 230 per cent, from 529 to 1,745, for black people.

Hazel Blears, a Home Office minister said: "I am concerned about the undermining of confidence in the criminal justice system by stop and search, and that is why I am saying that we need a change in the way that we deal with these issues."

Ministers are establishing an "action team" to review the use of stop and search. It is also setting up a "community panel" designed to build confidence in the policy among groups perceived to be unfairly treated by it.

The figures provoked fury among Muslim leaders who warned of a backlash among communities that already felt marginalized after the September 11 attacks nearly three years ago.

Nazir Ahmed, a Labour peer for six years, said he was singled out by customs officers and plainclothes police recently at Heathrow airport while on a trip to Saudi Arabia.

"They explained that they were looking for money that could have been used for terrorist activity," Lord Ahmed said. He said earlier he and a colleague were picked out from 65 passengers for checks before a flight to Boston.

"We were the only Asian-looking men with beards in the queue. They took me into a separate area and went through my luggage item by item. It was embarrassing. When I questioned why I was being checked, the first reaction was: 'Don't you use the race card with me.'"

He said the communities were being alienated because "people are being stopped because of the way they look."

Massoud Shadjareh, spokesman for the Islamic Human Rights Commission, said there is a lot of Islamophobia and Islam profiling when dealing with terrorism."

Iqbal Sacranie, secretary general of the Muslim Council of Great Britain, said, "We are urging Muslims to combat the terrorist threat common to all... The cooperation we seek from the community has been affected because these very same people have been stopped and searched."

But Glen Smyth, chairman of the Metropolitan Police Federation, argued that the number of searches carried out on Asians was still low. "The increase has gone up from two per day to eight per day, so in terms of the people as a whole it is a small number."