The big difference between the UK system and some other systems is that in the UK a PhD student is primarily regarded, at least by the system (even if not always by the supervisor) as a student who is there to learn, whereas, at least in the EU system, PhD students are primarily regarded as researchers who are there to perform a role.
The OP asks "Why don't they reform their system to better attract international talent?". This assumes that students are regarded as something you want to attract in order to benefit the country. But officialdom in the UK regards students as people who take benefit, rather than give it. A student is receiving a service, not providing one. To a British official, asking why they don't fund overseas PhD student is the same as asking why they don't pay for the undergraduate tuition fees of international students.
So, the British government sets aside a certain amount of money each year from its education/training budget to train PhD students. As it sees its job to educate British people, it would usually only pay for the PhD education of British people - it is other people's governments' job to pay for the education of their own people.
All of this is at least partly related to the superiority of the Arts and Humanities in British culture as the place where real intellectuals come from - at least in the minds of those in power, who almost without fail have humanities degrees from elite universities. In the arts and humanities, this view that PhD students are not part of a research workforce is closer to the truth.
All of this should not be taken as an endorsement of this situation, which I think is terrible.
All hope is not lost though. While with the UK leaving the EU, students from the EU became international students, the government has partially offset this by saying that up to 30% of students recruited to the main government-funded PhD programs (UKRI DTPs/DTCs) can be overseas students. In practice, I've found that this cap hasn't been a limitation, and we've been able to admit all the overseas students that ranked high enough in open competition in our DTP.