It’s most likely due to PC’s aim to slim down the monarchy. I don’t think that any of the children from Harry’s generation have titles, apart from W&K’s, who are directly in line to the throne?
They don’t, no, but I think that’s a bit of a red herring here. Harry and William are the only grandchildren of the Queen to have been made royal dukes upon marriage.
A royal Dukedom, once conferred, is hereditary down the male line. After a generation or so the holder, who will inevitably no longer be so closely related to the monarch, will no longer be “HRH the Duke of XYZ” but will just be “The Duke of XYZ”. So, HRH the current Duke of Gloucester is the cousin to the Queen (and his father, also HRH the D of G was her uncle, as another son of George V). His son and heir however will lose the HRH when he inherits the title. It will then be just another Dukedom in the UK peerage.
The top ranks of the nobility - Dukes, Marquesses and Earls, by custom are able to pass on a secondary title to their oldest son, as a “courtesy title”. Their other sons and daughters are styled as Lords and Ladies. So, the Duke of Gloucester’s heir is the Earl of Ulster (he’s actually called Alexander), and his daughters are Lady Davina Windsor and Lady Rose Gilman.
So, as HRH the Duke of Sussex, with a secondary title Earl of Dumbarton, Harry is entitled to allow his son to use that as a courtesy title. Charles’ wish to slim down the monarchy and reduce the number of princes and princesses, won’t affect that - it’s the rules of the nobility that apply to this situation, not the royal rules.