London Oratory – the leading catholic state school in Hammersmith and Fulham – has been allowed to break strict guidelines and carry on giving priority places to children whose parents worship at the Oratory Church in Kensington and Chelsea.

Lawyer Anthony Kennedy, friend of a former prospective parent, called in schools' adjudicator Andrew Baxter because he said Oratory's entry criteria found favour with children living outside H&F, and could be discriminating against ethnic groups and the disabled.

As part of a complex points-based entry system, employed because of the high demand for places, Oratory lists attendance at the church, in Cromwell Road, K&C, as one of the criteria.

But diocesan rules insist schools must not favour children who worship at a particular church because it 'disproportionally discriminates against certain ethnic groups'.

Despite concluding Oratory's criteria ' could lead to discrimination', Mr Baxter ruled in favour of the school after taking evidence that the make up of the congregation is 'culturally and ethnically diverse' and that only three per cent of the school's pupils come from K&C.

However, in-demand Oratory, which lists ex-prime minister Tony Blair's sons Nicky and Euan among its former alumni, has decided to scrap its rule to give priority to families living in the church's parish on grounds it has 'limited usefulness'.

Mr Kennedy believes the ruling has done nothing to help local children.

He said: "Why should a child who lives in H&F have to go to church in another borough? I don't understand it.

"We have ended up with a new grammar school situation where only the most pious can gain a place. This is putting up barriers, and the rest of then world is left to go to the worse schools."

The school says it has to employ a strict points-based over subscription system because it is attractive for families across the whole of London and that, because the majority of applicants secure high priority on the basis of their religious practice, further discrimination is required.

It also points out the Archdiocese of Westminster does not believe it deviates too far from his guidance, and said some departure from the rule is necessary to prevent a change to the 'ethos' of the school.

Mr Baxter did rule, however, the school must change the wording of its baptism guidelines to include the age (four months) by which a child should have been baptised and that it must make clear in its entry criteria it gives absolute priority to children 'looked after' by the local authority.

Earlier this week it was revealed deputy prime minister Nick Clegg is looking to send his son to the school.