The key words you have omitted that appears in the legislation is 'where they reasonably can'.
There is no such caveat in terms of the obligation to re-route passengers:
Where it is reasonably to be expected that the delay in the arrival at the final destination under the transport contract will be more than 60 minutes, the passenger shall immediately have the choice between:
... (b) continuation or re-routing, under comparable transport conditions, to the final destination at the earliest opportunity;
Whilst there is plenty of froth and fury on this and other sites about what people think it should mean, it's never been established in law.
It's long established in law that the equivalent obligation in EU261 (which has identical wording in all material respects) imbues an obligation to rebook passengers at the earliest opportunity, using other operators or even modes of transport where appropriate.
It would be implausible to argue that the same words have a fundamentally different meaning in the PRO, and to do so would be to argue the existence of an exception or limitation to the law which simply does not exist.
The Recitals to EU261 set out the Regulation's aim of achieving a high level of consumer protection and have been influential in the interpretation of that Regulation. The PRO has very similar Recitals - again, it would be implausible to argue that a narrow, anti-consumer interpretation should be taken.
The word is vague enough to allow for it to mean almost anything.
Which part of the above-quoted legislation are you suggesting is vague?
Presumably one day it will get tested in court - but anything that risks driving up Government costs is likely to be quickly nipped in the bud.
That's as may be, but for the time being the law stands and TOCs must abide by it.
As for the suggestion it may increase government costs, I'm afraid that's the opposite of what happened here; had the OP been re-routed via Leicester (as was EMR's obligation) they would have been delayed by 30-59 minutes and so only entitled to receive 50% of their fare in Delay Repay. By refusing to re-route them, EMR increased the delay to well over 60 minutes and so doubled their Delay Repay liability.
In any event the purported "cost" of re-routing is a pathetic exercise in wooden dollars, given that the revenues of almost all TOCs (including both EMR and XC) flow to the government. I might have a shred of sympathy for the argument if we were talking about Lumo vs LNER, for example, but that's not the case.