Not mine either, this is where the IANAL disclaimer comes out!
But I believe it's because the paragraph you're referencing only relates to delays.
As you identify, Article 5 puts the same obligations on an airline as for delayed flights - i.e. under Article 8, it must offer a refund or re-route. That's to prevent an airline cancelling a flight for commercial reasons then expecting the passenger to pay a lot more close to departure.
It also provides that Duty of Care under Article 9 applies. So if you're leaving much later, you're entitled to the same provisions as someone on a delayed flight is. But it can also potentially be applied to an earlier departure.
Originally Posted by gov.uk
Where reference is made to this Article, passengers shall be offered free of charge:
(a)meals and refreshments in a reasonable relation to the waiting time;
(b)hotel accommodation in cases where a stay of one or more nights becomes necessary, or
where a stay additional to that intended by the passenger becomes necessary;
(c)transport between the airport and place of accommodation (hotel or other).
Now in this case, the OP says they were inconvenienced by the much earlier departure and had to change arrangements considerably. In cases where a departure is earlier, Article 9 can be used to claim a hotel stay the night before, although I don't doubt it's subjective enough that a legal route might be necessary. As a couple of examples:
1. Passenger has a domestic flight scheduled to land at 8am, with a longhaul connection at 10am. The long haul is cancelled and the re-route now departs at 8am, so the domestic now needs to be the previous night - hence a hotel stay becomes necessary.
2. As in this case, the first flight is brought forward by a few hours. The passenger cannot reasonably get to the airport in time (maybe trains from their home don't run early enough), so now they need a hotel close by. This could also be payable by the airline, although it is the subjective one. But if the passenger could show evidence they had no intention of staying on the original itinerary, the airline would likely be liable.
Now to the compensation under Article 7. The very first paragraph only applies.
Originally Posted by gov.uk
1. Where reference is made to this Article, passengers shall receive compensation amounting to—
(a)£220 for all flights of 1500 kilometres or less;
(b)£350 for all flights between 1500 and 3500 kilometres;
(c)£520 for all flights not falling under (a) or (b).
That's it. Go no further. Article 5 says you're entitled to compensation under Article 7 because the flight left more than an hour earlier on short notice. Paragraph 1 details that compensation. Had the OP arrived more than two hours after the original plan, that would also have triggered full compensation. Cancellations just have a much lower bar than delays.
Fortunately, FT does have someone expert in these matters. Paging [MENTION=262802]corporate-wage-slave[/MENTION].