If I remember rightly the words crop up in the song where the male and female vocalists are abusing each other. It’s acting (albeit for a couple of mins and set to a tune). The logic of the banning argument is to purge any book, play, film, or musical that uses language taboo in polite company. It’s an artistic representation (of two people arguing) not an endorsement of their language.
If we censored "Fairytale of New York" on this basis then we would also have to censor Huckleberry Finn because it uses the word "nigger", and we Liberals are against that sort of thing, aren't we?
But I was also interested in Alex Wilcock's posting and his claim that faggot, as an insult for a gay person, is "a word derived from the religious practice of burning gay men alive".That sounds unlikely to me, and a search of the net suggests that the use of "faggot" in this is sense is far too recent for the story to be true. The most scholarly discussion I can find comes from The Straight Dope:
Incidentally, it appears that Nick Clegg has never heard of "Fairytale of New York" at all. Odd.
The first known published use of the word faggot or fag to refer to a male homosexual appeared in 1914 in the U.S. It referred to a homosexual ball where the men were dressed in drag and called them "fagots (sissies)." Ernest Hemingway, in The Sun Also Rises (1926), included the line, "You're a hell of a good guy, and I'm fonder of you than anybody on earth. I couldn't tell you that in New York. It'd mean I was a faggot." A 1921 cite says, "Androgynes [are] known as 'fairies,' 'fags,' or 'brownies.'"
George Chauncey, in his excellent 1994 work Gay New York: Gender, Urban Culture, and the Making of the Gay Male World, 1890-1940, says that the terms fairy, faggot, and queen were used by homosexuals to refer to men who were ostentatiously effeminate. Homosexuals who were not as showy referred to themselves as "queer" in the first decades of the 20th century.