Travelling from the UK to Spain, have lost passport, any ideas?

As you are British, you are from the EU, and you only need a national identity card to enter the Schengen area (Spain in your case).

According to this good Wikipedia article on the Scengen visa policy, you should even "be afforded every reasonable opportunity to obtain the necessary documents or have them brought to them within a reasonable period of time or corroborate or prove by other means that he/she is covered by the right of free movement." "checks on persons enjoying the Community right of free movement should be limited, as a general rule, to the verification of their identity and nationality."

In other words, you can go with your national ID (is your driver license your national ID?) or take all the documents you have (if no national id) including the receipt from the passport office stating you have lost and asked for a new passport. Explaining your situation, and given the wording used, there might not be any issue, at least, it is worth trying.

As @Relaxed mentioned, the problem may also come from the airline staff. While the border guard may allow you in, the airline staff may also require some specific ID documents. You should check your airline website what piece of ID is required. My opinion is that in the end you should still try to go and see.