"If the company can take them on as PAYE, doesn't that just prove that they shouldn't have been employing them as contractors in the first place? Sounds like RBS were doing exactly what HMRC created IR35 to stop."
There are a massive number of projects rolling through all the banks and financial services in general. Each contractor may only be engaged for a few months for a specific project, with a high churn rate, so while the overall number of contractors appears high, the reality is that they are not "Friday to Monday" scenario "disguised employees" that HMRC created IR35 to stop. I've not come across a genuinely disguised employee contractor since about 2004, it simply wasn't worth the risk.