Reading between the climb-down page is a laugh.
"Constructive feedback from our communities and stakeholders on the new measures indicated that there was significant support for safeguarding peer review by modifying submission behaviour"
We said it was broken, and about as efficient as pulling the names out of a hat. Plenty of academics have also got annoyed at being called stakeholders, but they're not listening.
"...but some concerns regarding the detailed implementation..."
We said they were stark, staring mad and it wouldn't work.
"After careful consideration, we have therefore made the following amendments in implementing this aspect of our published policy".
Yeah, pity you didn't try careful consideration in the first place. Consultation also works. That's consultation as in the real "ask people what they think, then take that into consideration" as opposed to the PR consultation of "ask people what they think, then do what you'd planned on doing anyway".
"Why the change?"
The peasants were revolting
"Has this policy been watered down so much it is ineffective?"
No, but it has been watered down enough that we don't have to worry about hordes of organic chemists showing up outside Polaris House with pitchforks...
But basically, unlucky researchers can still put in one application in the 12 month "ban" period. There will probably be further modification when the research council notices the number of Fellows of the Royal Society they ban under this random scheme. If we're really lucky, they'll notice that the difference between coming 32nd out of 60 and coming 10th out of 60 isn't much at all.