Yes they could try to take it off him but if he goes for a C1 licence the Government guidelines say he could still be licensed.
see section 45 and annex B.
It is a pest because he will have to inform the DVLA if he goes on injection and then they will only give him a one to three year ordinary
driving licence and if he goes for a C1 he will have to renew every year following a fresh medical.
The recent guidance from the DfT says something along the lines of Type 2 shouldn't mean an automatic ban, and each case should be decided on it's own merits.
Medical Criteria
45. It is clearly good practice for medical checks to be made on each driver before the initial grant of a licence and thereafter for each renewal. It is common for licensing authorities to apply the 'Group 2' medical standards - applied by DVLA to the licensing of lorry and bus drivers - to taxi and PHV drivers. This seems best practice. The Group 2 standards preclude the licensing of drivers with insulin treated diabetes. However, exceptional arrangements do exist for drivers with insulin treated diabetes, who can meet a series of medical criteria, to obtain a licence to drive category C1 vehicles (i.e. 3500-7500 kgs lorries); the position is summarised at Annex B to the Guidance. In the light of the latest guidance from the Secretary of State's Honorary Medical Advisory Panel on Diabetes Mellitus and Driving, it is suggested that best practice is to apply the C1 standards to taxi and PHV drivers with insulin treated diabetes.
And in a bit more detail.
http://www.dft.gov.uk/pgr/regional/taxi ... 92?page=10
The PCO have even mellowed on the issue.
http://www.tfl.gov.uk/assets/downloads/ ... -02_06.pdf
The diabetic folks have a view.
http://www.iddtinternational.org/living ... ving_taxis
View form the top bods at the DVLA.
http://www.dvla.gov.uk/media/pdf/medica ... mar_05.pdf
Further to the above I just come across something from ROSPA that agree with the gov best practise.
http://www.rospa.com/roadsafety/info/ta ... ensing.pdf
So if the safety folks are happy with C1, then WTF aren't the council?