It's not exactly intentional but it's also mostly expected.
Note this isn't the default var_dump output. The PHP var_dump function is overloaded by Xdebug and it modifies the output to include HTML and formatting.
You can disable the var_dump overload in php.ini:
Code:
xdebug.overload_var_dump=0
Or at runtime:
PHP:
ini_set('xdebug.overload_var_dump', 'off');
This is not something we would be willing to adjust our escaping to allow the HTML here so ideally the overload needs to be disabled or you have to accept the HTML would be escaped.
I'll leave this open in case we decide to perform rudimentary strip_tags or similar, but honestly I think that's unlikely to produce reasonable results.
My Signup Abuse Detection & blocking add-on does this on the server & spam trigger log so I can run it them in development mode with xdebug and get nice logs.
I'ld throw an @ or better a try/catch around the ini_set incase the server setup has something very weird around touching random ini settings