I currently have a formal complaint pending with with the Veterans UK operational team over just the same thing with Fife Council.
I receive the War Pensioners Mobility Supplement, which, like the Higher Rate of DLA/PIP Mobility Component, which I have no doubt your daughter receives, qualifies for the issue of a Blue Badge automatically, and also for the exemption of Road Tax.
When I applied for renewal last month, the normal six weeks before expiry i was told I was too early, and I had used the wrong form and had to apply for a "discretionary" badge (the "discretion" being the Council's, as to whether they issue a badge or not) and they gave me the relevant form, which sounds very much like yours.
This I submitted in person last week and was told my application would be assessed by the Blue Badge Team and "if successful" I would be informed. They also asked for the details of my GP so that they could check my condition with him. In fact, he has never assessed me, all my examinations having been done by MoD doctors.
I have no doubt this is all part of the Government's Crackdown on benefits, but if they pay me £600 a month (tax free!), and exempt me from Road Tax, for my disability, why are they bothered about a couple of quid a week parking charges?