From my distant past as an administrator in the education field I think you find that the reason for this is so that additional funding can be targetted to the schools with a high proportion of service children. The reasoning behind this is that there is likely to be a transient population of children and that additional funding across all educational items is required to meet the effects of a churn in scool population. Counties like Wiltshire are keen to have regular information on their service schoolchildren population so they can get more money out of central government.
I can see that individuals are right to be concerned at providing the information but it may just help ensure that school their children attend receives that little extra funding.