It's not nonsense, but it might be a bit optimistic. And if accurate, it might leave Calderdale exposed through other channels.
Under Section 40(2) of the FOIA, personal data is exempt if disclosing it would conflict with either data protection principles or GDPR. Calderdale's Section 17 notice argues that "it may be possible to identify the member of staff involved in the matter from the information held in the details of the complaint and subsequent decision, even once personal information had been redacted from the records". As a result, disclosing the data would breach data protection principles and is therefore exempt.
So far, so good.
However, Calderdale may have exposed themselves here through the ICO concept of "cut-off points" between personal and non-personal information.
ICO produces a guidance note specifically dealing with HR complaint files: https://ico.org.uk/media/for-organisations/documents/2021/2619040/s40-access-to-information-held-in-complaint-files-final-v-31.pdf . This ICO document notes that complaint files may contain personal data about complainants and other individuals, but that complaint files may contain "information that is not personal data at all". That kind of data, e.g. data setting out the organisation's policies on for example what kind of books can be displayed, is the data that Calderdale might be expected to share. The guidance states that "Some information in a complaint file will never be personal data, regardless of the context it is held in and the way it is used – even if it is used in a way that affects an individual." The guidance cautions that "It is important to be able to detect any ‘cut-off’ points, at which information within a complaint file ceases to be personal data and becomes ordinary, non-personal information."
Calderdale's Section 17 claims there was no non-personal information anywhere in the paperwork relating to this issue. If there was really no non-personal information - no general policy discussion - that would imply that at no time was the availability of gender-critical books described in any terms except as a direct response to an HR matter.
In turn that would suggest that the risk of discriminating against gender-critical library visitors was never even discussed. For example, had one employee said "I'm not sure we should remove all the gender critical books, that might disadvantage readers with those views" that statement would surely be non-personal information which should have been disclosed. The implication of Calderdale's reply is that the effect of their actions on gender-critical readers, and indeed the underlying principles by which books should be displayed or hidden, were never addressed at all, except in relation to the concerns of a specific employee.
In other words I wonder if Calderdale's response suggests that they may have breached the Public Sector Equality Duty by acting without consideration for discrimination on the grounds of belief.