Khan was originally given an indeterminate sentence in 2012, for his part in an al Qaeda-inspired plot to bomb the London Stock Exchange, meaning he would remain locked up for as long as it was felt necessary to protect the public.
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But this sentence was quashed the following year and he was given a 16-year jail term, allowing him to be automatically released after serving eight years.
Further questions were raised when the Parole Board said it had no involvement when Khan left prison last December, saying he “appears to have been released automatically on licence”.
Brandon Lewis, the security minister, declined to comment on the monitoring of Khan – who fatally stabbed people at a paid-for conference – and said it was “one of the things police will be looking at”.
Chris Phillips, a former head of the UK National Counter Terrorism Security Office, warned the criminal justice system was “playing Russian roulette” with the lives of the public.
Pointing out that the original trial judge “wanted this man in prison for a very very long time”, he described Khan’s release as “quite incredible”.
“What we have got to ask now is why is the criminal justice system allowing people like him to be back on the streets?” Mr Phillips said on Sky News.
“You cannot keep control of these people when they are released. Putting a tag around someone’s leg is not going to stop them from killing people.”
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Mr Phillips called for different rules for terrorist prisoners, saying: “At the moment, they are being treated like normal prisoners. They are not normal prisoners.
“He was still a radicalised Jihadi – he was put back out on the streets in order to kill.”
Paul Gibson, a former head of counter-terrorism at the Ministry of Defence, echoed the criticism, saying of the release: “A lot of people will find that extraordinary.”
Calling for terrorists to be “treated separately from ordinary criminals going through the criminal justice system”, he suggested a review of the rules was inevitable.
“He was a convicted terrorist. He was radicalised, he was found guilty in a court of law, he went to prison,” Mr Gibson pointed out.
Sadiq Khan, the mayor of London, said he had opposed the scrapping of indeterminate sentences and questioned whether people released on licence were being monitored.
“Does the Ministry of Justice, does the probation service have the powers and resources to properly supervise people who are clearly dangerous?” he asked.
Mr Khan also dismissed Conservative claims of higher counter-terror spending, saying: “You can’t disaggregate terrorism and security from cuts made to resources of the police, of probation, the tools that judges have.”
The prime minister has agreed the release of Khan was “a mistake” and said he had “long argued” that criminals should not be released early.