Because the 700s have to provide for medium distance flows such as Brighton - London, and short, dense, urban flows such as Sutton loop services and East Croydon - London Bridge, where (per London Underground) there shouldn't be an expectation of getting a seat, but there should be an expectation of squeezing onto the train: hence more standing room.
Therefore the design is a compromise.
Ideally, of course, Sutton loop services (and those to the Kentish suburbs) would fall under a London Overground type model with LOROL equivalent rolling stock, whilst Brighton - Bedford (etc) would be operated by something similar to a class 379, internally. But there are infrastructure and operational constraints, plus the Wimbledon/Sutton mob kicked-off at the initial suggestion they would lose services through the core, IIRC. And when London protests, London generally wins.
The broader context is significant population growth in London and the south-east, which happened by default rather than specific policy initiative and therefore was not accounted for in transport planning until very recently. (See also schools, hospitals and power generation capacity.)