just found this on aother site ....
If like me you have an old paper licence which is falling to pieces and don't want to pay nearly £20 to exchange it for the new photo style. Theres an easy way to get it for free. Just fill in the change of address part on your paper licence, with a friend or relatives address (make sure you ask them first) and post it off to DVLA. They will then send you a letter (to the address you gave) saying 'they can't issue you with a new licence because they need a passport photo.
So fill in the form they sent you using your current address, stick your photo on the plastic bit on the form (you must use BLACK ink when filling the form in or they will send it back to you). You will need to enclose your passport or get someone like your doctor to sign the back of the photo(read the notes on the form).
Pop it in the post and wait for you free upgrade!