The medal, which was presented to Flight Lieutenant Bill Reid, was bought by an anonymous bidder at Spink in central London, setting a new world record price for a Victoria Cross awarded to a Briton.

Flt Lt Reid was honoured for his part in a bombing raid over Germany in 1943. He flew a Lancaster bomber 200 miles towards its target despite being wounded in two separate fighter attacks.

He also managed to get the plane home after the attack, despite the death of his navigator and the fatal wounding of his wireless operator.

Mark Quayle, medal specialist for Spink, said: “This was a fully justified price reflective of a remarkable act of gallantry.”

Flt Lt Reid, who later joined the RAF’s 617 Squadron, better known as the Dam Busters, was shot down in 1944 and spent the rest of the war as a prisoner.

The medal, which is the highest honour for gallantry in the armed forces, was first awarded by Queen Victoria in 1854.