Is it a big brother control thing? Do they want to monitor British citizens who are citizens of potentially, how shall I put it, “difficult” countries?
What I don’t understand is that they don’t ask if you are a citizen of another country, but require you to send any foreign passport you may hold. This makes the rule easy to game: destroy the passport of country X, tell country X you lost it, it becomes void, and you don’t have to send it to the Home Office. Then, once you get your new British passport, apply to country X for another shiny new passport… This also means the Home Office won’t see any visa stamps you may have had on that foreign passport – if that’s what they were interested in.
By contrast, if you have nothing to hide, and are not up to any dodgy etc, I’m not sure what the Home Office gains by looking at your foreign passport – yet you can’t travel till they return it, it’s a just headache if it gets lost, etc.