On my first license application a very similar thing happened,my GP wouldn't write to dvla until paid,and DVLA wouldn't pay until the information was received!
This was very concerning,and when I offered to pay the fee, DVLA advised against this!
I decided to pay the fee (£60 I seem to remember) to get the ball rolling!
£60 was worth all the headache,£300 is far greater than the application fee,so understandable that DVLA find this fee excessive.
My application was completed by a locum GP,who only had my notes on his system,plus my advice on the telephone,and was deemed to be dependent!
Luckily I had found this forum,and had managed to get 2 lfts done over 6 months,and a stopped drinking date outside the 12 month mandatory timescale.
A CDT of 0 8 secured me a 1 year license, with a new medical in 3 weeks (delayed),with the fee paid by DVLA,plus no cost to me this time by my own GP surgery.