The 16GB iPhone 4 will not be more than £500 on Pay As You Go.
If you look at the new line up, it's nothing more than a "slide" in models.
8GB iPhone 3G replaced with 8GB iPhone 3GS - £349 price will remain.
16GB iPhone 3GS replaced with 16GB iPhone 4 - £449 price will remain.
32GB iPhone 3GS replaced with 32GB iPhone 4 - £589 price will remain. The 32GB 3GS is down to £499 to clear stock, but it hasn't always been this price.
Obviously VAT changes, etc will come into play but I think it's safe to say the prices will simply remain as much the same as possible and the models will simply "slide" over accordingly.
I agree I think it will be £499 for the 16gb and £549 or £599 for the 32gb