There should be an immediate investigation into claims that jobseekers were bussed in to London to work as unpaid stewards during the Diamond Jubilee celebrations, Lord Prescott said today.
He said it was "totally unacceptable" that benefit claimants were reportedly forced to sleep in the cold under London Bridge in the early hours of Sunday morning, adding that Close Protection UK, which was contracted to provide up to 30 unpaid stewards, had failed to "show a duty of care".
In a letter to Home Secretary Theresa May, Labour's former deputy leader said the allegations raised "serious questions" about using private firms to police the Olympics.
His letter follows claims in the Guardian that Close Protection UK bussed in a group of long-term unemployed to work as unpaid stewards during the River Pageant on Sunday to mark the Queen's Diamond Jubilee.
The newspaper claimed the workers, including another 50 people on apprentice wages, were brought in as part of the Government's Work Programme, where the unemployed must take up placements in order to continue receiving benefits.
It is alleged they were forced to camp overnight under London Bridge before they started work but sources at the Department for Work and Pensions said they were only outside in the cold for two hours after a "mix-up" when the driver of their bus refused to let them sleep on board.
Lord Prescott said a full investigation was now needed.
In his letter to Mrs May, he said: "If the allegations are true, it is totally unacceptable that young unemployed people were bussed in to London from Bristol, Bath and Plymouth and forced to sleep out in the cold overnight before stewarding a major event with no payment.
"I am deeply concerned that a private security firm is not only providing policing on the cheap but failing to show a duty of care to its staff and threatening to withdraw an opportunity to work at the Olympics as a means to coerce them to work unpaid.
"It also raises very serious questions about the suitability of using private security contractors to do frontline policing instead of trained police officers.
"I call on you to immediately investigate this matter and alert the Security Industry Authority to see if CPUK (Close Protection UK) has breached its SIA Approved Contractor Status. I also ask you and (Culture Secretary Jeremy Hunt) urgently review CPUK's contract to provide security during the Olympics.
"It would be completely inappropriate for a company that appears to have such a blatant disregard for the care of its workers to be policing such a prestigious event."
A UK newspaper spoke to two unnamed jobseekers, who said they had to change into security gear in public, could not access a toilet for 24 hours and then were taken to a swamp-like campsite outside London after working a 14-hour shift in the rain on Sunday, marshalling crowds who had turned up to watch the river pageant.
According to the paper, the apprentice workers were paid £2.80 an hour while those on the work programme were unpaid.
One woman on the scheme told the newspaper: "London was supposed to be a nice experience, but they left us in the rain."
Liberal Democrat MP Stephen Williams, who represents Bristol West, said he was writing to Work and Pensions Secretary Iain Duncan Smith and Employment Minister Chris Grayling, asking them to investigate and impose sanctions if necessary to make sure it does not happen again.
He said: "I think the Work Programme is an important Government reform but this sort of thing wholly undermines people's confidence that it is a fair programme.
"It does look in this particular case that a contractor working with the Work Programme has treated people under their care in an appalling way.
"Just because somebody is volunteering, it doesn't mean you can treat them badly."
Abi Levitt, director of development at Tomorrow's People which was contracted to conduct the programme for the Government, said everybody involved volunteered to take part after expressing an interest in working in the security industry, adding that the event provided crucial experience.
She said the problems started in the early hours of Sunday morning when the coach carrying the workers arrived early and there was nobody from Close Protection UK to meet them.
Ms Levitt said: "It was a big error on their part and we are very unhappy about it."
In a statement, Mr Grayling said: "The Work Programme is about giving people, who have often been out of the workplace for a long time, the chance to develop the skills they need to get into sustainable jobs. We think it's better to train people for the available jobs instead of leaving them on long-term benefits, as happened in the past.
"These jobseekers were doing a short-term placement as part of a training course, with the aim of this leading to qualifications and jobs in the security sector."
Molly Prince, managing director of Close Protection UK, said in a statement to the Guardian: "We take the welfare of our staff and apprentices very seriously indeed.
"The nature of festival and event work is such that we often travel sleeping on coaches through the night with an early morning pre-event start... It's hard work and not for the faint-hearted.
"We had staff travel from several locations and some arrived earlier than others at the meeting point, which I believe was London Bridge, which was why some had to hang around. This is an unfortunate set of circumstances but not lack of care on the part of CPUK."