Is there a bike light law?

I was pulled over on Bishopsgate the other night. Had a flashing red LED light attached to my backpack and a white headlamp on. The police said that the lights had to be fixed to the bicycle and not me and threatened me with a 60 pound fine. Then said I could go and buy lights at the nearby bikeshop instead of getting a ticket. Sounds like a load of shit to me but I was polite etc just in case I was wrong and did what he said until I was out of his sight.
So do the lights have to be fixed to the bike?

Whether or not it's the law, attaching lights to a bag is typically a bad idea since LEDs are far less effective off-centre and it's very hard to centre on a bag.

Best bet is one fixed to the bike and one on the bag for drivers in higher cabs (trucks) to see.