Nobody, and ceertainly not your local council, can take away any rights you have Chris. Even if a neighbour gets planning permission and building regulations consent your individual rights remain.
So.....do you have a right to light? Well I don't know, but assuming that your window has been where it is for the last 20 years it is a pretty safe bet that you do. The law on rights to light is quite complex, but in essence the first thing to consider is does the loss of light cause you any real loss. The courts have decided in the past that we are only entitled to a reasonable amount of light, so if you were a seamstress and needed lots of natural light to perform your trade a small loss may be significant...it isn't likely to be so as a residential owner, but it may be. Frankly you'll need advice from an expert who has seen your property and the proposed extension. If you have suffered an actionable loss, then the courts theoretically have two possible remedies....Either they can issue an injunction, preventing the loss (not very likely though as it is a remedy the courts are loathe to use), but more likely you would be awarded damages. In practice your expert and your neighbours expert would use well established criteria and a bit of horse trading and advise you both to settle out of court.
"Secondly, assuming his extension goes hard up to the boundary, would I be able to build something similar - can you have two walls with no gap between?"
Firstly the air flow thing suggested by masona is simply wrong. There is no such requirement in any legislation. You can have two walls hard against each other. The most important rights you and your neighbour have in this respect are contained in the Party Wall Etc Act 1996. You can look on
this website for some information about the Act.
In a nutshell the Act gives your neighbour the right to build right up to the boundary and even project foundations under your land. He does not need your consent to do so, but he is required to serve notice on you under the Act if that is what he plans. If he does build it is his wall and you have no right to use it later.
He may, with your consent, build a wall astride the boundary. This wall will then be a party wall and you will have the right to use it later. However, you cannot force him to build the wall there. Moreover if or when you do use the wall for your own extension you will have to compensate the neighbour or his succesor.
If you do intend to build an extension yourself later then having this wall built astride the boundary makes good practical sense.