We are paying more, thats why there are deluxe editions and season passes

I can see where you're coming from, but your post has some holes:

Development of the games has become more expensive, that's totally true. Their distribution, on the other hand, has become much cheaper (even just physical distribution), meaning the more a games sells the the more the increased cost gets leveled out by the lower distribution cost. This is especially true with digital sales, where in case of console games the retailer's margin gets slashed entirely (in PC games, the retailer's margin gets replaced by Steam/GOG margin unless it's sold in their own shop). As a result, the earnings per game are higher than they where even just 5 years prior. 5M copies sold of a game at 60$ in 2017 should earn the company about 30M $ more than it would have in 2010, negating most of the development cost increase in the timeframe.

Since the returns of the lowered distribution costs are higher the higher the sales are, the big publishers have reduced their games lineup drastically in the last 10 years, from about 15-20 games a year by a big western "AAA" publisher to less than 5 nowadays. Just count the number of games each from Activision Blizzard, EA, Ubisoft and so on have released (or planning to release) this year. EAs numbers a boosted by their sports titles, but otherwise, it's pretty bleak. In the current scenario, smaller than "AAA" games have just no place in the lineup of a big publisher anymore. Worse, smaller games tend to be hit or miss for the publisher, which would be fine... but despite the stock market being risky at it's core, investors and shareholders are pretty much risk-adverse, hence why they only churn out big mass marketable games out anymore.

The stock market is also the main reason for DLC, Season Passes and Microtransactions in general. Before they got widespread in their games, quarterly numbers tended to fluctuate a lot, with a big blockbuster bringing lots of money while quarters without them looked dry by comparison, even turning into the negatives sometimes due to the development costs of said blockbusters not being covered by a bigger game release in said quarter. DLC and Microstransactions are getting spent upon throughout the whole year, smoothing out the income for the publisher and making them much more attractive on the stock market. Even more so since the income from the whales and dolphins (big and medium spenders in microtransactions) tends to outgrow the income from the sales, and they don't have to share that income with platform holders (unless it's sold separately on their storefront) or retailers. Fifa's ultimate team for instance is worth a reported 800 Million $ each year.

With both of the previous points, one can see smaller games not only don't have any place in the lineup of big publishers anymore, but with the income from microtransactions, there's effectively also no need for them

So, the big question now is: what can be done to reverse this situation? Sadly, short of not buying their games or at least any of the season passes, DLC and microtransactions, there's simply not much there can be done to bring back the smaller games from the big publishers, and especially beloved series of them who have died in the meanwhile because they didn't reach the critical mass for the publishers or just simply couldn't get monetized easily. Some of these might be bought up by smaller publishers or bigger indie developers, but that's a rare case and the publishers prices on the dormant IPs are said to be quite prohibitive.

So, who still can develop "A" and "AA" games when the big western publishers are unwilling to do so? Japanese publishers still do, as do the smaller publishers who lack a big AAA game anyway. But indies can do it also, as Hellblade: Senua's Sacrifice clearly demonstrated. The problem for them is that these games are in a peculiar spot now: Too small for the big ones, but also too big for the small ones to develop. Unlike a pure indie game where often even modest sales numbers are enough to recuperate the investment, these need clearly bigger sales to succeed financially, but without the necessary marketing budget to make the game known to the masses this is very difficult to achieve unless the IP has a strong following from it's past or very good word of mouth.

Tl;dr version:

Mid-tier and smaller games from the big publishers are essentially a thing of the past, replaced by DLC and microtransactions because these bring the publishers more and a more foreseeable, stable income, and these are essentially there to boost the income and smoothing the income over all four quarters as opposed just the releases of their big games. The stock market approves greatly, and thus won't take it back anytime soon, just tweak it at best.

One hole that I see, is that paid DLC exists not only to get more money out of players, but to reduce the number of used games in the secondary Market in the early days after a titles release. For example, I haven't touched breath of the wild in 6 months, but I'm keeping it for DLC. Likewise with Horizon zero Dawn. So, I think in order for your idea of higher upfront pricing to work, we'll have to switch to all-digital, with out a way to resell rights.

You have to remember games may stay $60 in America but the prices go up worldwide every gen.

I've gone from spending £30 on PS2 games to £55 on PS4 games.

They take that cut already on retail games, hence why I excluded PC games. That missing cut is also the reason why PC games are generally cheaper than console games, both in retail and digitally. However the size of he cut may vary between physical and digital versions of the same game on a same platform - but that's something only business insiders could really tell you about, not me.

True, though the UK is an extreme example. During PS2 and early PS3 era the British Pound was worth 2 dollar, while now with the brexit it's value has plummeted to 1.2 to 1.4 dollar a Pound

Games were still £50 before brexit. Now I've starting to see £60 games.

It can't all be blamed on currency and taxes. Apple tried when they said iPhone X is $1000 in the US and £1000 in the UK

But the Note 8 is $1000 in America and £850 in the UK.

So it does play a factor but they've definitely been increasing the price with each gen, the same thing happens elsewhere especially in Australia. 

As far as I know that's not the case. Like I said, it's quite possible that they take a bigger cut in the digital sales, but it's not enough to negate the additional income from not having to share with a retailer.

I'm not blaming it all on the exchange rate, I'm just saying that because of the devaluation of the British Pound the change is even bigger in the UK than in other countries.

Didn't forget it, just didn't want to go too deep into detail and confuse anybody trying to read it. But you're right, that some additional money they don't have to spend. It was however included in my calculations below.