“I don’t know what happened in this individual case but I do know for a fact that the cuts and reorganisations of the prison and probation service have made them much less able to do their jobs and keep the rest of us safe,” he told BBC Radio 4’s Today programme.
“We’ve neglected the criminal justice system, and now the chickens are coming home to roost.”
The terrorist who launched Friday’s attack, which killed two people, had been jailed in 2012 over a plot to bomb the London Stock Exchange.
Usman Khan, 28, was originally handed an indeterminate prison sentence for public protection with a minimum term of eight years.
But the sentence was quashed on appeal in 2013 and he was given a determinate 16-year term, meaning he was released automatically when he reached the halfway point last December.
His attack follows years of warnings over the failure to properly rehabilitate or monitor dangerous criminals, seeing convicts committing murder and rape while supposedly under supervision.
With Chris Grayling as justice secretary, the Conservatives handed the monitoring of low and medium-risk offenders over to private firms 2014.
A damning parliamentary report released earlier this year said the “disastrous” programme had worsened probation services and made the public less safe.
The government announced it was renationalising the supervision of criminals in May but the new model will not come into force until 2021.
Concerns had also been raised about the ability of prison staff to properly manage terrorists amid a crisis driven by overcrowding, understaffing, disorder, violence and drugs.
Ian Acheson, an ex-prison governor who reviewed Islamist extremism in the UK’s jails, told The Independent last year that jails were becoming “ungoverned spaces where extremism thrives”.
In the wake of the London Bridge attack, he attacked “a lethal combination of arrogance, ineptitude and defensiveness in Whitehall”.
While Boris Johnson has repeated his calls to keep some offenders in prison for longer, either by lengthening sentences or changing release rules, Mr Acheson said the an “arms race on sentencing” ignored crucial issues.
“At the heart of this is the destruction of the prison and probation service through crazy, failed, ideological austerity cuts,” he added.
On Saturday, Nazir Afzal, the former chief prosecutor for north west England, revealed he had been rebuffed when he warned Mr Johnson about failing to work properly with dangerous prisoners.
He had raised the problem of terrorists being released “whilst ostensibly rehabilitated but still radicalised” in many government meetings, before warning Mr Johnson in June 2016.
On Sunday, the prime minister denied steep cuts to the criminal justice system had been a mistake.
“It was nothing to do with parole, nothing to do with the probation service,” he insisted, blaming sentencing laws brought in by Labour.
The Parole Board said it had no involvement when Khan left prison, saying he “appears to have been released automatically on licence”.
The Independent understands that he had undergone deradicalisation courses while in jail and was subject to multi-agency public protection arrangements involving police, probation and restrictions on movement.
Mr Hardwick, who was forced to resign last year over the John Worboys case, said the processes require people to make judgements on risk, adding: “Sometimes they’ve very good at it but sometimes they get it wrong. There is no certainty.”
In a propaganda statement, the terrorist group described him as one of its “soldiers” and added: “He carried out the attack in response to the calls to target citizens of the [US-led] coalition countries.”
Khan launched the knife attack at a prisoner rehabilitation conference associated with Cambridge University's Institute of Criminology, where he was a guest.
Khan launched the attack without warning at around 2pm on Friday, and was fought by delegates and staff at Fishmongers’ Hall before being chased onto London Bridge and shot dead by armed police.
In a statement, Mr Merritt’s family said he “believed in redemption and rehabilitation, not revenge”.
“We know Jack would not want this terrible, isolated incident to be used as a pretext by the government for introducing even more draconian sentences on prisoners, or for detaining people in prison for longer than necessary,” they added.
His father, David Merritt, attacked the front pages in the Daily Mail and Daily Express describing a “blitz on freed jihadis”.
“Don’t use my son’s death, and his and his colleague’s photos - to promote your vile propaganda,” he wrote on Twitter. “Jack stood against everything you stand for.”
Sentencing law changed after Khan was jailed in 2012, and if he was given the same sentence today he would have had to serve at least two-thirds of it.
An urgent review has been launched by the Ministry of Justice into the licence conditions of more than 70 released terror offenders.
At least one man, 34-year-old Nazam Hussain, has so far been arrested as a result.
A Ministry of Justice spokesperson said: “Anyone sentenced to terror offences has access to counter terrorism specific rehabilitation courses and would certainly be admitted to one if requested.”