This is a classic case of health and safety being used totally inappropriately as an excuse for excessively risk averse behaviour. Hanging lightweight bunting from lamp posts is a low risk activity and to suggest that it may cause lampposts to fall over is ridiculous.
The case in London that the article appears to refer to is one that involved work-related activity. I can categorically say that it was nothing whatsoever to do with bunting and it is wholly inappropriate to link the two situations.
Let's be clear, there's nothing in health and safety law to prevent anyone from celebrating the Queen's Jubilee. The Diamond Jubilee should be a huge national event, a time for celebrating together, getting a real sense of community going, up and down the country - not for getting tied up in pointless red tape. The organisers are right to challenge this silly decision.