I do not believe that there is actually a 'right' answer, there are circumstances where taking either option, continuing to final or orbiting on base leg may cause problems. However, the simple fact is it is the Aerodrome Controller's responsibility to ensure a safe and orderly flow of traffic in the circuit, if necessary by exercising positive control over traffic under their jurisdiction. In this scenario this has not been achieved, the pilot has not been given enough information to decide what would be the best course of action. Therefore, if anything untoward was to happen I believe the responsibilty would lie on the shoulders of the controller.
Secondly a number of people have suggested continuing dowm to 200-300ft before commencing a go-around. Not a good idea, if the controller is not prioritising properly there is a possiblity that there may be vehicles or personnel on the runway which have also been 'forgotten' about. If you descend below 500ft over the top of these you could yourself be in breach of the low flying regulations. It is always best in these situations to be as squeaky clean yourself as is possible, especially if you wish to take the matter further.
