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From the article it seems to indicate they were unable to secure their first, second or N place school. There will undoubtedly be schools they can now get into that they did not list as their preferences, but obviously crappier schools.
The goal seems to be limiting preferential enrollment at schools that have too many students in their "catchment areas". Since not all schools are "oversubscribed", the students will have to go to the schools that have room, even if they live close to a school they tried to get into.
The lottery doesn't seem to reach deep enough that everyone has a guaranteed "safety school" (US college application term).
That's kind of it. Many things in the UK are decided on where you live (it's always referred to as a "postcode lottery"), from schooling to whether the local NHS Trust will pay for certain expensive treatments. My sister recently moved house and one of the reasons they bought the place that they did was that their daughter can get into one of the better local schools.
You have to apply to get into a school and some, especially faith-based ones, have strict entrance guidelines. My secondary school (age 11 to 16/18 depending on the exams you take) refused to consider any pupil who had sat (whether they'd passed it or not) the Eleven Plus exam as they wanted pupils wanted to be at the school rather than ones who only wanted to get into a supposedly more prestigious one.
There are obviously good schools and bad schools and the good ones get very over subscribed/applied for because, well, they're good schools. This then leaves an imbalance where you get schools without the mixture of intelligent and less-able kids. But, as my mum said in reply to my email about this:
Having said that, as knowledge grows about how to educate less able kids, there are fewer failing schools and children are achieving more than in previous generations. Don't believe all you read in the media!
I guess I should just make clear that you *will* get an education - it's never "screw you, you won't be schooled", it's just that those 1,046 pupils and their parents will now have to go through the incredibly stressful, often heartbreaking, appeals process where they have formal appeal process with the school board. This can often go on into September, which is when the new school year starts. And, if they still can't get into any of their choices of schools, then they will have to go to one of the unpopular schools.
I'd also point out that my writing in these responses is fairly shocking.