Labour demanded the Conservative minister’s resignation over the remark, which sparked anger from disability charities and trade unions.
But David Cameron’s spokesman said the Prime Minister has full confidence in the minister in the light of his apology.
Mr Cameron flatly disowned Lord Freud’s remarks when ambushed by Labour leader Ed Miliband at Prime Minister’s Questions and later ordered him to apologise.
Employment minister Esther McVey ramped up pressure on the peer by warning that the comments would “haunt” him. Tory backbencher Mark Garnier said he should be sacked.
Lord Freud was recorded at a fringe meeting of last month’s Conservative conference responding to Tunbridge Wells councillor David Scott, who expressed concern that some “mentally damaged individuals” who want to work are unable to do so because employers were unwilling to pay them the £6.50-an-hour minimum wage.
The minister replied: “You make a really good point about the disabled. There is a group – and I know exactly who you mean – where actually, as you say, they’re not worth the full wage and actually I’m going to go and think about that particular issue, whether there is something we can do nationally, and without distorting the whole thing, which actually if someone wants to work for £2 an hour, and it’s working can we actually…”
Mr Miliband denounced the comments as a sign that “the nasty party is back” and told Mr Cameron: “Surely someone holding those views can’t possibly stay in your government.”
Insisting it was “absolutely not” his view that people with disabilities were not worth the full rate, the Prime Minister – whose late son Ivan suffered from a rare genetic condition – retorted that he would not “take lectures” from Labour about looking after the disabled.
The Prime Minister’s official spokesman said that, immediately after the clash, Mr Cameron instructed his office to contact Lord Freud and “make it crystal clear what the next steps should be”.
Shortly afterwards, Lord Freud issued a statement in which he acknowledged he had been “foolish” in “accepting the premise” of the question posed.
“I would like to offer a full and unreserved apology,” he said. “I was foolish to accept the premise of the question. To be clear, all disabled people should be paid at least the minimum wage, without exception, and I accept that it is offensive to suggest anything else.
“I care passionately about disabled people. I am proud to have played a full part in a government that is fully committed to helping disabled people overcome the many barriers they face in finding employment.”
He added: “I am profoundly sorry for any offence I have caused to any disabled people.”
A Labour spokesman said: “This attempt at an apology is not the end of the matter. Lord Freud claims he merely accepted ‘the premise of the question’,
but it was he who said some disabled people are ‘not worth the full wage’ and it was he who suggested paying people just £2 an hour. In fact, he said he would go away to look at this issue, suggesting that this government would consider it.
“Someone holding these views shouldn’t be in government.”