Someone may have realised that running fewer services with longer trains is a better model than frequent services with short trains.
It doesn't provide any additional capacity and it only saves a few drivers. You still need the same number of Train Managers and catering staff (if you're to provide full facilities throughout).
It increases Generalised Journey Times by quite a lot (nominally half an hour), which significantly reduces the attractiveness of the railway. And with the way it's been implemented by XC, it means the loss of direct connections between stations that have long enjoyed them.
I'll put it this way. XC (and Virgin before them) didn't increase to a half hourly service for fun. There are plenty of services over the years that were dropped because the demand didn't justify them - but these weren't, up until Covid came.
Someone in the DfT is signing this off. Arriva run the trains they have to run.
The DfT has a significant input into what happens, but ultimately if an operator says it can only run XYZ, it doesn't really matter what the Department wants. The DfT does sign off on everything, but they don't dictate to operators what proposals they should be putting forward.
XC are bringing back a few additional Bristol-Manchester services in the new timetable. Clearly there is an aspiration to reinstate more, but that is all that they think they will be able to resource for now. A very disappointing position but it just goes to show how slow and inflexible the railway is.