At our gym we find the girls who had a successful past season are the most successful at their new level. They know the feeling of getting 1st and 2nd and they go to every meet wanting it. The kids who would only place on a couple events or would get 9th or 10th became okay with their rank and as they moved up the levels never had that same motivation to win. So in a way, I can see where your HC is going. Harsh, yes, but it definitely promotes higher placement from the girls.
So to summarize this long post....yes, your HC seems to have some high standards but I do see his point in a way. It moves up the kids who are serious about winning (after all this is COMPETITIVE gymnastics...if they don't want to be serious about competing then join a rec class). I do think the girls should be able to up train even if they are held back as long as they have perfected their past level skills. If they haven't, well then their is no point in up training. If they can't to round-off double back-handspring with tight legs