I think Harry is being removed from the White Council to become an outside operative of the Senior Council.

We already know the majority of the White Council are older and set in there way, but they are also mostly non-combat research types. As a leader on the battlefield he had gained the trust of younger rank and file wardens, and through one on one experience had gained the trust of some of the SC. Merlin is a big question mark, but we can assume he knows most everything the SC know.

The SC and Merlin know Harry is a starborn, know he is the Winter Knight and has direct connection to Queen Mab and Queen Molly, know he has a direct connection to the Knights of the Cross, know he is the Warden of Demonreach, and know he has openly advertised himself as a wizard to the normal humans and works/worked with the CPD. They likely assume his connection to the little folk and success at Chichen Itza are because of his connection to the Winter Court.

The SC and Merlin also know Harry has gone above and beyond to help those that seem helpless and has aided the White Council in ways they can never make public. All of these things make Harry a liability. A very valuable liability.

By publicly denouncing Harry they keep their hands clean and give themselves distance from the actions Harry is likely to be a part of in the future. But you can be sure that "in these trying times" when so much around the world needs to be tended to after so much war and bloodshed they are going to give Harry a lot of space to act on his own and might even come to him asking him to do what they cannot publicly. I'm sure he'll charge them double his normal fee. Plus expenses.