Terrorism and security measures are being mixed in the public mind with issues of domestic disorder, the Liberal Democrat leader has said.
Mr Kennedy pledged to vigorously oppose ID cards
It would be a very dangerous and "insidious" thing for those in power to encourage, Charles Kennedy added.
The home secretary wanted to let people think global terror was somehow linked to anti-social behaviour, he suggested.
In his response to the Queen's Speech, Mr Kennedy also pledged to vigorously oppose plans to introduce ID cards.
That opposition would be on the basis of cost, their ineffectiveness in fighting terrorists and a lack of confidence in large-scale computerisation projects, he told MPs.
ID cards had not prevented the "depraved individuals" who had carried out the terrorist attacks in Madrid and New York, he said, adding the cards were no "fundamental stop" or "failsafe".
"I still believe and I still hope that we can thwart this proposed legislation," he said to cheers from his own benches.
Mr Kennedy also alleged that, just as the Bush administration had led people in the US to believe there was a link between al-Qaeda and Baghdad, David Blunkett wanted the public to believe there was a link between terrorism and social disorder.
Mr Blunkett had also successfully turned the word "liberal" into "derogatory term of political abuse", he added.
Earlier Lib Dem home affairs spokesman Mark Oaten said the government was "talking up" the fear of crime and terror in the hope of winning advantage at the ballot box.
Home Office Bills - including national ID cards and moves to combat terrorism, drugs and anti-social behaviour - dominated Tuesday's Queen's Speech.
Speaking on BBC Radio 4's Today programme Mr Oaten said: "It does seem to me that, in the run-up to a general election, both the home secretary and prime minister are starting to talk up issues of fear and crime in this country."
"I acknowledge that there are difficulties there, but the warning shot to them should be not to play politics with terror."
But Home Secretary David Blunkett denied the government was "scaremongering," saying it had "played down" the terrorist threat by emphasising "alert over alarm".
Lib Dem chairman Matthew Taylor also hit out at the ID card plans saying: "Crime and terror would be better addressed with 10,000 more police and a national border force, rather than wasting £3 billion on ID cards that didn't protect people in the US or Spain and which would curtail British rights and liberties."
He added that Labour was focusing on fear, while the Lib Dems would concentrate on hope.
"Labour is offering nothing on the big issues facing British families."
Lib Dem president Simon Hughes accused the government of introducing laws to fight problems on which they had already legislated.
Mr Oaten says the government is 'talking up' fear and crime
He told BBC Radio 4's World at One that the government had just introduced a "whole raft of measures" on anti-social behaviour, police reform and the fight against terrorism,
"They've come back almost before the ink is dry on the last paper. It seems as if the government does not know what it wants," he added.
Lib Dem health spokesman Paul Burstow said there was nothing in the Queen's Speech to tackle the stigma attached to mental health problems.
"It is focused on a Home Office security agenda, not improving mental health services.
"A new Mental Health Act is desperately needed, but it must be a law to protect and improve services for patients, not a means to demonise those with mental health problems."
Lib Dem disability spokesman Paul Holmes welcomed news disability and discrimination laws would be introduce.
But he warned the government against dropping the plans because of a legislative timetable squeezed by the forthcoming general election.
"Disability groups had expected this legislation to be introduced in 2001 or 2002 or 2003 and will not forgive the government if yet more delays occur."