Contemporary news reports suggest that the administration believed that a full work permit scheme would have been unnecessarily expensive and cumbersome to operate, and that immigrants would help fill some of the existing skills shortages, without impacting significantly on wages or the welfare state. There is certainly evidence that the initial tranche acted to do this, although the effect on wages as a whole is more debatable (see here versus here) and immigration almost certainly had a statistically significant chilling effect on wages for unskilled labour.
As to whether this was the right decision, that gets much more complicated, (not least in how to define right in this context without devolving into opinion) since even if a work permit scheme had been implemented, it would have ended by now, and it would not have prevented migration from other EU countries, or directly affected immigration from outside the EU, and not all attitudes towards migrants come from rational reactions to simple numbers.