The expansion of state-funded Muslim schools in Britain since 1998 has developed against a backdrop of sustained public political rhetoric around the wider position of British Muslims in both political and educational contexts. This article explores the public policy rhetoric around Muslim schools under New Labour and the subsequent Coalition and Conservative governments and compares how these narratives align with outcomes in terms of numbers of, and types of, denominational Muslim faith schools in Britain. The article applies a Critical Race Theory approach based on the construction of counter-narrative through a critical analysis of policy and its outcomes. This analysis is contextualised through exploring the implications of counter-terror strategies such as Prevent for the political and educational equity of British Muslims as stakeholders in the state. Against this context the article explores the extent to which successive policy frameworks and political narratives around faith schooling have played out in terms of denominational state-funded Muslim schools. Whilst gains have been made under New Labour and the successive Coalition and Conservative governments, critical analysis reveals that public policy narratives allow for a misleading account of the extent to which Muslim communities have been enfranchised through state funding for Islamic schools.