I always assumed Hubbard's line was a joking reference to laws against public cross-dressing, which existed in some (most?) American jurisdictions at the time this was made. I vaguely remember hearing about arrests for this being possible when I was a kid. While I don't know whether the UK had such laws then, it wouldn't surprise me if they did, or if Knott was willing to simply assume so.
The one law like this I saw quoted on the web had weasel-words about "without lawful purpose". I'd guess that makes it unconstitutionally vague by today's standards, like an anti-loitering law. However, at least it would stop the police from raiding the Texaco Star Theater TV show and arresting Uncle Miltie in a dress.
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