I think this story comes up every year, but a Labour council (Sandwell Council) has withdrawn funding for a St George's Day parade over concerns if might attract far right elements. (Presumably, by "Far Right" they actually mean the "Far Left" BNP)
I read this story on Con Home, here. They also illustrate that Conservative Councils are taking the opposite approach and are encouraging St George's Day activities.
My feeling is that the approach, typically, but not exclusively by the Labour Party in ignoring all things English, and the Union flag is wrong. Firstly, the approach is a double-standard when compared to the (welcome) encouragement towards Welsh and Scottish identities and emblems.
Secondly, if extremist elements have "hijacked" our symbols, (and i am not convinced this is the case) then the solution is not to ignore that this has happened, but to claim them back. We should be educating our school children about the Union flag, and in fact the flags of all the component nations of the UK. We should be using our emblems and flags to represent our fair and decent values.
The UK should not be presented as a prison to the Scots and the Welsh, but as a group of nations who have stood together, and been stronger for it for over 400 years as Great Britain, and 200 years as the UK. We have a rich and diverse history that should be embraced, not filtered and objectified.
I saw a very revealing cartoon strip recently on Blue Eyes Blog recently that comes to mind now, you can view it here.