“New Passports will cost us £3.6BILLION. “
Nobody will need a new passport until their current one runs out. From a date in the future new issues will carry a new (non-EU) design. Since people pay the full cost of their passport renewal the only cost will be the redesign work (which will probably amount to a pot of Snowpake to paste out “European Union” which appears on the front cover and the first page inside above "United Kingdom of Great Britain and Northern Ireland").
“But we are going to need them a lot more”
Er…why? UK citizens need a passport to travel to other EU countries at the present and they will need the same (one) passport to travel there following Brexit.
“They cannot say we have freedom of Travel in Europe when we do not have that entitlement.”
Neither driving licences nor Passports say the holder has freedom of travel in Europe. Freedom to move between Schengen countries is afforded by that agreement and anybody, whether in the area legally or not, has freedom of movement and no documents are necessary (because there are no border checks). People travelling from the UK to a Schengen country need a passport in the same way as they need one to travel to a non-EU country.
“ If Greece had been kicked out of the EU, do you think we would have let Greeks to enter the UK with an out of date and invalid EU passport? Of course we wouldn't.”
We’re not talking about out-of-date passports. They are obviously invalid regardless. But in the circumstances you describe a Greek passport would certainly be valid until expiry.
The point you are missing, Gromit, is that passports are not issued by the EU. They are issued by the individual nations. The only connection with the EU is the two mentions of the organisation I explained above. If you look in your passport you will find that it is “Her Britannic Majesty’s Secretary of State”, not Jean-Claude Juncker, who requests the bearer be allowed free passage. If you look in the back you will find it remains the property of Her Majesty’s Government, not the European Commission.
I know the referendum result must seem a disappointment for some, but they really must get a grip.