It is from the annuals, though I'm taking it from a 1981 collection called "Doctor Who Adventures in Time and Space" of which we have two copies, one is B's one is mine, no idea which is which.

It is indeed written from the Doctor's perspective - or at least from the perspective of someone called Dr. Who and the story is resolved by taking someone back in time who prevents the whole society of tool wearers from developing in the first place.

"As he settled himself for sleep a last drowsy smile crept over his lips. Sometimes, the frightening paradoxes were not as frightening as one had first thought."