I think it is good to have a mix of local and long distance services as it allows some flexibility for extra leisure demand at the weekends on local routes by borrowing the long distance stock.
In the case of the East Midlands that means using the London trains to increase capacity for weekend races at Uttoxeter, summer weekend specials to Skegness and winter specials to Lincoln Christmas market.
This would probably be deemed "too difficult" if this was across two different franchises.
It's developed on this franchise as an innovative response to the rolling stock crisis caused by the DfT arbitrarily slicing up Central Trains.
Going back decades many extra services of a summer weekend to places like Skegness were provided by utilising the West Midlands commuter fleet which to a lesser degree than you see in London but still helpfully had surplus units stood down at quieter times but still required. BR used old DMUs in long rakes followed by 150s which Central followed.
Now many EM local journeys are leisure oriented and just as much stock is needed on normal weekends as in the week. Consequently you can only run longer trains by robbing other busy services (currently Matlock line trains, very busy themselves in the summer, and some Liverpool trains run with fewer carriages than they need to service the Skegness demand).
The end result of the split was that Cross Country and EMT have little scope to service demand peaks because their fleet is fully utitlised, while off peak WMR have a load of trains parked up at Tyseley and other locations.
The London fleet on EMT does have some slack in it and they've been quite proactive in using it to support the local service where possible including paying out to train ex Central crews on 222 and HST traction.
As you correctly point out a loss making local EM concession would never have the capacity to provide the required service to places like Skegness and other special events because there's never any spare trains and they wouldn't be able to afford a float of them to sit unused for 6 months of the year.