It now takes as little time for the Daily Mail to be referred to as it takes for someone to mention Hitler!
I think the point is that it's been decided that the public sector itself will determine whether or no a person it is paying to do work is doing so as an employee or not. Actually I think the difference between an employee and a company is a lot more than whether or not there is a paper company set up for the contractor to work under.
I've read the legal advice given to contractors, and it is pretty obvious they are exploiting a load of legal loopholes, the valid Ltd company you mention is in fact a paper entity setup to exploit loopholes in employment law and taxation.