Short answer: it's not lawful, but town council's get away with it because it takes serious organisation to challenge.
If the Council want to introduce a new tenancy agreement they need to give you 12 months Notice to Quit to terminate the current one (Section 1. Allotments Act 1922 as ammended by Section 1 of the Allotments Act 1950) and then offer you a new one. I can't see how the threat to not re-let you your existing plot if you don't sign with less notice can be lawful as it's certainly not moral, but it happens.
I would argue that a term in the agreement that says the Council can change the rules and tenancy agreement is unfair under the Unfair Terms in Consumer Contracts Regulations 1999 if it doesn't also require the Council to give you at least as much notice as you'd need to pack your allotment up and leave, which is 12 months really. From Schedule 2, TERMS WHICH MAY BE REGARDED AS UNFAIR: j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract.
Conditions like "the interpretation of this agreement the town councils decision is final" is almost certainly unfair under the Unfair Terms in Consumer Contracts Regulations 1999 as it allows the council to interpret the agreement however it wants. From Schedule 2, TERMS WHICH MAY BE REGARDED AS UNFAIR: m) giving the seller or supplier the right to determine whether the goods or services supplied are in conformity with the contract, or giving him the exclusive right to interpret any term of the contract.
There is no obligation on a town council to consult on rule changes, and many don't.
You're free to complain to your local Trading Standards that terms of the tenancy agreement are unfair under the Unfair Terms in Consumer Contracts Regulations 1999, but there's no guaranteeing that Trading Standards will understand what you're talking about or do anything about it, and there's also a fair chance that your town council will evict you for your impertinance.
If you're all members of the NSALG you might possibly ask them to talk to the Council about it.