A former Metropolitan police commissioner has admitted that the surveillance of the family of Stephen Lawrence by undercover officers was institutionally racist, the spycops inquiry has heard.

While Paul Condon was in command of the Metropolitan police in the 1990s, a controversial undercover unit spied on the family as they sought to persuade Scotland Yard to properly investigate Lawrence’s racist murder.

The officers reported information about the divorce of Lawrence’s parents, Doreen and Neville, to their superiors.

Giving evidence on Tuesday, Condon said the covert monitoring of the Lawrences and their campaign “meets very well the parameters of institutional racism”.

The failure to rigorously investigate the 1993 murder was one of the biggest and most contentious issues he had to handle, and caused enormous damage to the reputation of the UK’s biggest police force.

Speaking more widely about the undercover unit, Condon also said the Metropolitan police had failed over decades to control the special demonstration squad (SDS) which committed “horrendous” abuses.

He said he was appalled by the wrongdoing of the unit, which spent 40 years spying on tens of thousands of political activists. He told the inquiry there were “rogue officers who’ve done some bad things” but that the greater fault lay with the Met’s systemic failure to supervise the unit rigorously.

He said the undercover officers were told daily to “lie, cheat and deceive as a way of life”, but added that the Met should have realised the covert work “can be corrupting” if strong rules were not in place.

Condon, who became a member of the House of Lords after his police career, is the highest-ranked officer to have given evidence to the long-running public inquiry, which is headed by the retired judge Sir John Mitting.

The inquiry was set up after the Guardian revealed how the SDS spied on the Lawrences and their supporters in the 1990s.

Mitting is examining wide-ranging misconduct by the undercover officers. This includes how they monitored grieving parents while they sought justice for relatives or campaigned to expose police malpractice, regularly deceived women into long-term relationships and even fathered children, stole the identities of dead children and lied in court.

The SDS undercover officers adopted false identities to infiltrate mainly leftwing groups between 1968 and 2008 in deployments that typically lasted four years.

At the outset of his testimony, Condon said he wanted to “personally apologise for every single person who has been damaged by the actions of officers in the special demonstration squad over the decades, and I am appalled by so much of what I have learned throughout this inquiry and I sincerely apologise to every single person who has been damaged in this process”.

He said there were “horrendous things that went wrong” in the SDS and “appalling behaviour by individual officers”. He added: “Equally, I think the greater fault lies with the Metropolitan police as a whole over decades, that these officers were told daily as their job to lie, cheat and deceive as a way of life and what they’re asked to do.”

“The Metropolitan police should have realised that without limits, without ethical guidance, that this work in those circumstances can be corrupting and even someone with a strong moral compass will give in to baser instincts.”

However, Condon said he knew nothing of the abuses when he was in charge of the Met between 1993 and 2000. He said it was “unrealistic” to suggest that as the head of the Met, he would have been aware of the day-to-day running of a small and secretive unit.

Condon said he “never at any time commissioned, encouraged, authorised, acquiesced or was aware of any” of the surveillance that was carried out on the Lawrences and their supporters.

Asked by David Barr, the inquiry’s chief lawyer, if he would accept that the surveillance was “an expression” of institutional racism, Condon replied: “Yes.”

An inquiry by Sir William Macpherson into the killing said in 1999 that institutional racism within the Met was one of the reasons that allowed Lawrence’s murderers to escape justice. Police leaders accepted the findings, then later claimed to have reformed the service to the extent that it no longer applied.