Mr Clarke has already been critical of Tony Blair's leadership style
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Ex-home secretary Charles Clarke says the failure to find weapons of mass destruction in Iraq "undermined public confidence" in the "war on terror".
He told the Evening Standard the Forest Gate raids had then "reinforced" doubts about intelligence services' abilities.
Mr Clarke said people had to realise that "absolute knowledge" could only exist in a "police state with intrusion into...every family and community".
He called for a "serious debate" with judges about confronting terrorism.
Mr Clarke, who lost his job in May, has already criticised Tony Blair for lacking leadership and direction.
Forest Gate
In an article in the Evening Standard, Mr Clarke says the failure to find Iraq's WMD had affected the government's subsequent claims on the terrorist threat.
He makes it clear that he backed the war on Iraq, but argues that intelligence-gathering needs to be strengthened.
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One of my most depressing experiences as home secretary was the outright refusal of any of the Law Lords to discuss the principles behind these matters at all
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"The experience with suspected weapons of mass destruction undermined confidence in the capacity of our intelligence services to make accurate assessments of the risks that we face," he said.
"The recent events at Forest Gate reinforced that."
Abul Koyair, 20, and his injured brother Mohammed Abdulkahar, 23, were arrested and later released without charge following a high profile raid, involving 250 police officers, on their Forest Gate home last month.
Control orders
Mr Clarke stressed that the intelligence services "do an outstanding job in the immensely difficult world where little is known, and much only suspected".
But he said the London suicide bombings on 7 July have changed the way in which the law has to be applied.
Last week a High Court judge's ruled that control orders, which impose detention without charge, break European human rights laws.
"One of my most depressing experiences as home secretary was the outright refusal of any of the Law Lords to discuss the principles behind these matters at all," says Mr Clarke.
He said one of the consequences of the Human Rights Act was that the country's most senior judges were taking decisions of "deep concern to the security of our society, but without any responsibility for that security".
Speaking out
He said that their lack of participation fuelled the "dangerously confused and ill-informed" debate in which some question Britain's adherence to the European Convention on Human Rights.
"It is now time for the senior judiciary to engage in a serious and considered debate about how best legally to confront terrorism in the modern circumstances that have changed so profoundly since 9/11 and 7/7."
The one-time strong Blair ally was sacked as home secretary in May after it emerged that 1,023 foreign prisoners were released without being considered for deportation.
Following a series of media interviews last week, he said he had decided to speak out to restore his political reputation - and to put his "point of view on the record".