The silence switch is not working and apple say a new phone is only option, is this the case for such a minor component

I have the iPhone 4 and it's working perfectly, I can switch on the do not disturb option but would prefer to have a repair of the mute switch. Apple store advise they don't repair and a new phone is only option!

That is correct, Apple does not do repairs on parts, they will exchange the whole phone for the service fee:
Out-of-Warranty Service
If you own an iPhone that is ineligible for warranty service but is eligible for Out-of-Warranty (OOW) Service, Apple will service your iPhone for the Out-of-Warranty Service fee listed below.
iPhone model
Out-of-Warranty Service
iPhone 5s, iPhone 5c,
iPhone 5
$269
iPhone 4S
$199
iPhone 4, iPhone 3GS,
iPhone 3G, Original iPhone
$149
copied from Apple - Support - Service Answer Center

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