Speaking on BBC Radio 4’s Westminster Hour yesterday following a stabbing attack in South London, Ms Haigh said the system where prisoners are automatically released halfway through their sentences was introduced due to space constraints in the country’s jails.
But after it was revealed fanatic Sudesh Amman, 20, who stabbed two people in Streatham yesterday before being shot dead, was freed early at the end of January she said it may be time to review the procedure.
Amman was jailed for possessing and distributing terrorist documents in December 2018 and he was released despite a warning that he posed a continued risk.
Ms Haigh said “sentencing cannot be the only thing” considered but she added: “We’ve got to think about why automatic early release was introduced, it was because our prisons were full.
“Now that is not the case anymore and I do believe it’s right the parole board should have a proper say.”
But she said there was also a pressing case to address what was happening inside prisons.
She said: “[What] we really need to look at is what is happening inside prisons and would keeping this individual in prison for a further 18 months, would he have come out of prison any less radicalised?”
She said her instinct told her that he would have emerged with even more entrenched views.
“He probably would have come out even more dangerous than when he went in,” she added.
Prime Minister Boris Johnson has said he will announce plans today for "fundamental changes to the system for dealing with those convicted of terrorism offences" following the Streatham attack.
He had already promised changes following the London Bridge attack in November when another recently-released terrorist, Usman Khan, stabbed two people to death while wearing a fake suicide vest at a prisoner rehabilitation event in Fishmongers' Hall.
Details of the Counter Terrorism (Sentencing and Release) Bill were released in December with measures including forcing dangerous terrorists who receive extended determinate sentences to serve the whole time behind bars and scrapping early release from jail for those classed as dangerous and handed extended determinate sentences.
Sam Armstrong, from the Henry Jackson Society - a foreign policy think tank - said Amman was thought to have been staying in a bail hostel in south London.
He said the society had warned in December that Amman was due for release within the next two months and should not be let out of prison.
Amman, who at the time of his sentencing was 18 years old and had an address in Harrow, north-west London, had been jailed for three years and four months.
Scotland Yard said armed officers were following the suspect on foot as part of a "proactive counter-terrorism surveillance operation" on Streatham High Road.
A device found strapped to the body of the suspect was a hoax, the Metropolitan Police added in a statement.
It said: "The situation has been contained and officers from the Met's Counter Terrorism Command are now leading an investigation into the incident.
"The incident was quickly declared as a terrorist incident and we believe it to be Islamist-related."
One witness described seeing the man apparently carrying a weapon with "silver canisters on his chest" being shot in front of a Boots store.
Another said members of the public came to the aid of victims, with one saying she had been stabbed.
People took shelter in nearby shops as the incident unfolded on the busy south London high street.
Neighbours in Harrow told of their shock at what had happened.
Mechanical engineering apprentice Jignesh Khomani, 20, said he was "saddened" by the attack, and described Amman as "a pretty average guy".
He said: "I just did not expect anything like this would happen. He did not seem like a character who would do something like that."
A teenager, who said she knew him from the local neighbourhood but did not want to give her name, said Amman used to talk about being a terrorist but she and others thought he was joking.
Police continued investigations overnight, with search warrants being carried out at two addresses in south London and Bishop Stortford.
On Sunday evening, forensics officers could be seen near Superdrug and Boots examining the area for clues.