Yes many still have paper driving licenses which don't need to be changed unless for some reason your circumstances change such as you change address.
Credit card sized photo licenses were introduced a long time ago and originally the license was in two parts. The credit card plus a separate paper sheet where driving endorsements would be entered. Then a few years back they did away with the paper element as these records are now kept on computer by DVLC. The photo licenses have to be renewed every ten years so that the photograph is kept up to date, many people don't realise this and if you don't renew it's seen as not having a valid license (with a fine of £1,500 I think?).
I'm not sure but I think that they've cleverly linked your passport photo to your driving license. It's probably a way of slyly introducing photo identity cards to the U.K. without admitting it because many still object to I.D. cards which is a "foreign thing". Since you left the country the government introduced a requirement to produce photo I.D. when voting, no doubt as a result of electoral fraud within certain areas and communities in the country. Unfortunately this has caused problems as significant numbers of the community hold neither a passport or a driving license in particular older persons.