From what I heard, the order had been given to detain the guy, but the order never reached the Policeman. It's a bad situation, even if the orders hadn't reached him, why did he assume the order would be shoot to kill, was probably crapping his pants to be honest, considering the two days of bombings/attempted bombings in the weeks beforehand.
If we prosecute, which, if what we have been told is true, is really what we should be doing, just liike any other argument that ends in murder, even though the person is usually wracked with guilt, they are still prosecuted for the crime they commited, we can't make an exception of 'we thought it was a Terrorist', it opens the door to atrocities beyond measure.
However, if we prosecute it could cause an armed officer hesitate later for fear of prosecution and lead to the deaths of innocent people, and once again, the blame will land on the Police.
The training scheme at Hendon is still, at heart, based around the 'Bobby' approach, of interaction and communication, it doesn't always work very well, I'll admit, but the hearts in the right place, it's the brains that are misplaced. Policemen aren't really trained for this kind of thing, they can deal with people threatening violence to them, pulling a gun or a knife, someone who is scared, aggressive and really just wants to get away. They don't know what to do with someone who's aim is to kill as many people as they can, the training failed, the officer panicked.
There are lessons to be learnt from the whole thing, but pointing fingers or looking for 'why' is pretty pointless in the long run
