"In which case, why hasn't the government made a statement along those lines - i.e. that anyone owning such a car is not allowed to drive it until it's been "fixed"?"
Quite a number of reasons, not least among them that the people who bought the cars have done nothing wrong, and unless the government requires VW (Audi etc) to recall every car to make it right, providing every owner (even those who bought secondhand) with a courtesy car in the meantime, I don't think this is something that could be landed on the common man to have to deal with (it would be like, I dunno, not doing anything about bankers and recouping lost monies from the lower levels of society for instance).
Also, these cars would have failed up to date, modern tests, There are plenty cars out there on the roads that are more polluting, because they arrived on the scene well before these modern test-beating ones. Say someone owns a modern Golf, and an 80s Golf GTI, and they have to stop using the modern Golf, so they switch to the GTI, suddenly they're polluting more, the fuel economy is worse so they're using more fuel, etc etc.
So it's not that they're 'too polluting' to be on the roads, but rather that they should have been too polluting to be sold in the first place, and retrospectively clawing that back is somewhat difficult. Like I say, if you were to require VW to replace every failed car I suspect VW UK, and possible VW Global, would go under. Leaving all owners of the cars with a car they can't use, can't sell, and can't get replaced. At which point the government would likely be chivvied into helping out, giving a motoring bail out.
Or. They could leave those cars as they are, levy a fine that won't break VW but will certainly make a dent and hopefully see a change in attitude and approach (again, pretty much what didn't happen with the banks).
Much as I'd rather see fewer cars on the road, I don't think it's right that innocent Joe Public should be held accountable at the end of the day (and the rest of us who didn't even buy a VW, or subsidiary brand, who have to help in the bail out with our taxes).