Mr Smith, of Melksham, Wiltshire, said: “I honestly could not believe what the police officer was saying.

“He wasn’t rude about it at all. He was just very matter-of-fact about the flag being racist and offensive to immigrants.”

Mr Smith, an avid England football fan, said he used the flag to cover up a new set of speakers, which he wanted to hide from would-be thieves

He said: “I just thought he was joking and started to laugh, but he looked at me very seriously and said that I would have to pay a £30 on-the-spot fine if I refused.

“It was really strange and I drove home quite shocked.”

Tory MP Philip Davies, who campaigns against political correctness, said: “If this is the case then it is disgusting and totally outrageous and the policeman ought to be ashamed of himself. 

“How on earth can it be racist to fly your own flag in your own country? 

“It is this sort of politically-correct thinking that has helped to create the problems we have today. I would like to see the Association of Chief Police Officers make it clear that anyone flying the Union Flag or the flag of St George will not be prosecuted.”

PC Dave Cooper, of Wiltshire Police, could not confirm details of the incident as it had not been logged. 

But he admitted there might be situations where a police officer considered the displaying of a flag as an inflammatory act.

He said: “It all depends on the context. If they are going past a lot of Polish people, for instance, and abusing them, then we possibly would ask them to take the flag down.”

He said the officer involved in the incident could have been based anywhere in Wiltshire. The fact there was no log of Mr Smith being stopped indicated there was nothing wrong with his car.

But Chief Inspector Charlie Dibble, of Wiltshire Police, believed the issue was more likely to be one of road safety. 

He said: “The officer asked him to remove the flag from his parcel shelf, where he admits it was covering his speakers.

“Road safety and the ability to have a clear view at all times of what is behind you is of great public importance.

“Officers are encouraged to take positive action in this regard and this would apply if there was any object obscuring the driver’s view.”