Well, too bad it didn't work out, but you didn't really want to go back to work, anyway. I bet if you put your mind to it, you could find work somewhere else for that rate.
I've seen a few rate cuts in my time but never took one. At that point, it's a race to the bottom and won't ever end. Same thing when companies offer to "hire full time" instead of extend your contract. Tell them you appreciate the offer and will consider it once details are available, then delay as long as possible and finally turn it down.
Also - What kind of bizarro world does this company live in that they let HR dictate business decisions? HR's job is to protect the company from getting sued, that's it.