Probably because it was available and free ...but here is some info from Wikipedia .....
Packaging and wrapping
Fish-and-chips shops traditionally wrapped their product in an inner white paper wrapping and an outer insulating and grease-absorbing layer of newspaper or blank newsprint, though nowadays the use of newspaper has largely ceased on grounds of hygiene, and establishments often use food-quality wrapping paper instead - occasionally printed on the outside to emulate newspaper. The hot food and the steam it produces cause the paper wrapping to emit a characteristic smell, and the close wrapping prevents evaporation, giving the food a moist texture which can last for some time if the parcel remains unopened. Polystyrene packing, usual in many other kinds of take-away outlet, sometimes appears. Even when the fish get wrapped in paper, an open polystyrene container often holds the chips. Purists maintain that it "doesn't taste the same" in polystyrene or cardboard, lacking the smell and moist, steamed texture. Britain banned the use of real newspaper in the late 1980s. Australian fish-and-chip shops, faced with a ban on the use of actual newspaper in the 1970s, substituted butcher's paper as the external wrapping, though a few shops continue to wrap their product in newspaper, especially in rural areas.