Downing Street has brushed off the controversy over the treatment of unpaid jobseekers who provided security during the Queen's diamond jubilee celebrations.

In a rebuff to Lord Prescott, who has accused the government of "exploiting cheap labour", the prime minister's spokeswoman dismissed the treatment of the jobseekers as a "one-off" and an "isolated incident".

The spokeswoman said: "This is a one-off … This is an isolated incident. The company has apologised."

Downing Street responded to the criticism at its weekly lobby briefing shortly after Prescott accused the government of presiding over the development of labour camps following revelations that unpaid jobseekers on the government's work programme were asked by the Close Protection UK (CPUK) security firm to sleep under London bridge before stewarding the Queen's diamond jubilee celebrations over the weekend.

The former deputy prime minister has written to the home secretary after becoming "deeply concerned" by revelations in the Guardian about the treatment of up to 30 jobseekers and another 50 people on apprentice wages who were taken to London by coach from Bristol, Bath and Plymouth on Saturday before the pageant on Sunday as part of the government's work programme.

Downing Street dismissed the criticisms as it made clear that the government would not be making any changes to its work programme, which arranges for companies and charities to provide unpaid work experience for those on jobseeker's allowance.

The prime minister's spokeswoman said: "We understand that the company involved has apologised. But more broadly the work programme is about giving people who have often been out of the workplace for quite some time the chance to develop skills that they need to get a job that is sustainable … The work programme itself offers experience and the chance to develop those skills that people really need to get into sustainable jobs."

Two jobseekers, who did not want to be identified in case they lost their benefits, told the Guardian that they had to camp under London bridge overnight, to change into security gear in public, had no access to toilets for 24 hours, and were taken to a swampy campsite outside London after working a 14-hour shift in the pouring rain on the banks of the Thames on Sunday.

The TUC warned that the "appalling treatment of staff" that had been reported had shone a spotlight on "the damage that unpaid work experience risks causing people who are desperate to get back into proper employment, as well as the exploitative treatment that they can face".

Brendan Barber, the TUC general secretary, said the revelations suggested that government programmes involving unpaid jobseekers might be displacing proper jobs "that pay at least the minimum wage".

Barber also drew attention to government plans to water down workers' rights.

He said: "The main experience gained by staff appears to have been poor working conditions and exploitation. Worse still, the government is encouraging more employers to treat staff poorly at work by stepping up its attacks on basic employment rights.

"This case has attracted attention because of its link to the diamond jubilee. Sadly low-paid vulnerable employment such as this occurs on a daily basis throughout the country. The number of involuntary temporary workers is at a record high. These are not the jobs that will take Britain out of recession and improve people's living standards."

CPUK has issued "sincere apologies" for what it called the "London bridge incident", but insisted that the poor conditions reported had been exaggerated.

Molly Prince, the managing director of CPUK, told BBC Radio 4's Today programme: "The whole situation has been exaggerated and we're talking about two or three people complaining out of 220 staff that were supplied to the event.

"It was badly handled and for that we've extensively apologised. We're not in the business of exploiting free labour."

A member of the Labour group on the London assembly has called on the London mayor, Boris Johnson, to give assurances that there will be no repeat of the "scandal" during the Olympic Games.

John Biggs has written to the Conservative mayor and the London Organising Committee of the Olympic Games (Locog) seeking assurances that all workers at the Olympics will be paid. Biggs also asked whether, in light of the revelations, the company was "suitable" to be given a contract for the Olympics.

"The fact that anybody, let alone unpaid workers, were forced to sleep under London bridge is truly scandalous," said Biggs. "To make it worse it appears that many of these people were essentially blackmailed into taking unpaid work, otherwise they wouldn't be able to work at the Olympics or would risk losing their benefits.

"How many of us would accept working unpaid, being forced to sleep outside and not given access to changing rooms or toilets? This incident is a sad indictment of the way our country is headed."

He added: "It is simply unacceptable in the 21st century for people to work unpaid and be forced to sleep outside. The company have tried to blame a logistical mistake, but the simple fact is they had a duty of care to their workers and they failed."

A spokesperson for the mayor of London said: "The GLA [Greater London authority] organises many events for Londoners and visitors every year and always contracts reliable and professional companies who it is confident treat their employees fairly and reasonably."