SOLVED
This was very interesting...The site user who was created to have the permission for webservices, had all the requisite permissions. However, crucially, this user never logged into the system and so had never agreed to the site policy. Interestingly, this user could read all data and update data of existing users, but could not create users. When the admin logged in as this user and accepted the site policy, this user was then able to create users as would be expected, using the webservices.
I hope this helps someone!
This was very interesting...The site user who was created to have the permission for webservices, had all the requisite permissions. However, crucially, this user never logged into the system and so had never agreed to the site policy. Interestingly, this user could read all data and update data of existing users, but could not create users. When the admin logged in as this user and accepted the site policy, this user was then able to create users as would be expected, using the webservices.
I hope this helps someone!