Alan,
Blame the EU, the reason we have a small plastic photo licence is that is the EU standard that we are obliged to conform to. However our gov like the paper part because you can't put endorsements etc on a bit of plastic hence we have what the EU want and what the Gov want.
It is another tax, I suspect even our grabbing Gov thought it was a bit much to make every one hand in the old paper licence for a photo one , they still get the money but in dribs and brabs and every year it goes up, changed my details 3 times in year a few years ago.
The £1000 fine is a DVLA fine and is not administered by the Police.
As said on another post you don't have to have either with you is stopped by the police, most of the time the police can check you licence details over the radio, depending how recently you have changed the details.
Bart