Of course Jackson had to leave out the scouring of the shire. Keep in mind that by that point the movie is already some seven-plus hours long. It diverges from the main story which is all about the ring,the ringbearers and the great final battle for middle earth on Pelennor Fields. To then keep the movie going with a totally anticlimatic sequence about the shire would have been just unworkable.
For the book, it’s makes a nice denoument to wrap up all the details about Saruman. But what works in the book isn’t always practical for a movie, that has to be told over a far shorter span of time.
Actually, he said in one of his interviews that he left it out because he “did not like that part of the book”.
It had nothing to do with the length of the film, but with his political leanings.