If there is any answer to your question, it is that there is no logic at all in Transport policy and strategic railway management.
It is unusual to cite 'overcrowding' as a justification for service withdrawal but not unknown. The most common method is to adjust the timetable so that the service is effectively useless as a means of getting to work, then cite 'lack of demand'.
If you require a recent example, you need only ask anyone in Bicester what they think about the new timetable to Oxford, which forces them to commute to work by road. I first encountered it in Henley-In-Arden, a commuter village between Birmingham and Stratford-upon-Avon.
I have no idea what the overall objective might be; since the dissolution of RailTrack, there are no shareholders whose short-term interests would be better served by selling all railway land and trackbeds for housing. It is widely believed that an influential faction exists in Parliament, the Civil Service and the management structures of rail companies, who hate railways in general and rail passengers in particular.