The British government promised sweeping changes to the system for dealing with convicted terrorists released from prison, after police shot dead an Islamist extremist who stabbed two people in a busy south London street on Sunday.Police said Sudesh Amman, 20, who was wearing a fake suicide vest, was shot on the busy Streatham High Road packed with shoppers at about 2:00 pm (14:00 GMT).Amman was recently given early release from prison where he was serving time for terror offences.The incident came just over two months after armed police shot dead a convicted terrorist on early release when he stabbed to death two people attending a prisoner rehabilitation conference near London Bridge in the heart of the British capital. The government responded to that attack by announcing longer sentences for terrorism offences, an end to early release and an increase in the counter-terrorism police budget in the coming financial year.Prime Minister Boris Johnson said after the latest incident: "Tomorrow (Monday) we will announce further plans for fundamental changes to the system for dealing with those convicted of terrorism offences."Deputy Assistant Commissioner Lucy D'Orsi said in a statement outside New Scotland Yard: "The suspect had been recently released from prison where he had been serving a sentence for Islamist-related offences."She added: "The suspect has not yet been formally identified however... we are confident he was Sudesh Amman, aged 20."Amman was jailed in December 2018 for 13 terror offences and was released from prison in recent weeks under "active police surveillance", media said.He had been arrested in north London in May 2018 on suspicion of planning a terrorist attack, a month after officers were told of posts he had made on the secure messaging service Telegram.'Machete, silver canisters'A witness to the attack described seeing a man "with a machete and silver canisters on his chest" fleeing from plain-clothes police before they opened fire."The man was then shot. I think I heard three gun shots," he added.The witness said he then sheltered in a library as other passers-by ran into nearby stores.Footage on social media purporting to capture some of the incident showed armed police officers surrounding a man lying on the ground on Streatham High Road.They then abruptly moved away, urging onlookers to move back, as other emergency vehicles arrived at the scene.D'Orsi said one man in his 40s was initially thought to have life-threatening injuries but was now in an improved condition in hospital. A woman in her 50s was treated and discharged. Another woman in her 20s suffered minor injuries.She is believed to have been wounded by flying glass.Johnson thanked the emergency services for their response. "My thoughts are with the injured and all those affected," he said.London Mayor Sadiq Khan added: "Terrorists seek to divide us and to destroy our way of life -- here in London we will never let them succeed."Lethal forceLocal Green Party councillor and national Green Party co-leader Jonathan Bartley, called the incident an "absolute aberration".He told AFP the area was "a very safe community with wonderful diversity".Former police tactical firearms advisor Andy Redhead said it was too early to speculate whether the dead man had been under surveillance.British police do not routinely carry firearms but armed units can make the decision themselves to use lethal force."If they believe there's a threat to life... the only way to deal with that is to use firearms," he told LBC radio.Britain downgraded the country's terrorism threat level from "severe" to "substantial" - warning a terrorist attack is "likely" rather than "highly likely -- in early November, its lowest rating in more than five years.