19 years after the Godhra carnage

 

Rail: frustration grows with Britain’s fragmented network

Jonathan Ford and Gill Plimmer in The Financial Times

Craig Johnstone checked tickets and train doors for more than 30 years. But if the job did not change, the uniform did: five times he donned new colours bearing fresh slogans as a different company took over running the Leeds to Manchester and Carlisle service. 

“Every uniform gets a little tighter — and I can’t fit into the old ones,” he says. “They change the roles and description and then they change them back again. That’s all the rail operating companies do. It’s continuous change, but all that changes are the colours and the corporate brands.” 

Change was supposed to mean more than just a new cap and blazer when John Major’s Conservative government released its plan to split up British Rail in 1992. Then UK ministers outlined a vision of private companies bidding for franchises and bringing fresh ideas, dynamic management and innovation. 

“More competition, greater efficiency and a wider choice of services more closely tailored to what customers want,” proclaimed the 21-page white paper that drove forward a privatisation that had been too controversial even for Margaret Thatcher, his predecessor, to risk.

Two decades on, passenger numbers have more than doubled since the last year under British Rail. The UK network saw 1.7bn passenger journeys in 2016-17, against 735m in 1994-95. After decades of decline, Britain’s trains are busier than at any time since the first world war. 

But behind the numbers lies a conundrum: how much of this is due to the benefits of privatisation, rather than demographic factors such as the shift to the suburbs, increasing urban congestion and a rising population? 

Privatisation has certainly led to more train services. According to an EU study in 2013, the UK’s trains and tracks are now more intensively used than any other developed European market bar the Netherlands, and this has undoubtedly contributed to the growth in passengers. 

Investment is up too; it is running at around four times the £1.6bn a year it averaged in the late 1980s, with £925m coming from the private sector last year, mainly to fund new rolling stock. 

“Privatisation reduced the malign influence of HM Treasury which wouldn’t allow a proper investment programme,” says Lord Freud, a former banker who advised on rail privatisation. 

But it is not obvious that two decades of private ownership have led to similar advances in service quality or have made the network more financially sustainable and secure. 

“It’s very hard for people to travel around and not suffer from the cracks in the system,” says Christian Wolmar, a train historian. “It’s everything, from knowing who to buy a ticket from to the signalling failure that delays the train to the lack of information when your train is cancelled. It’s hard to know which is worse — fragmentation or privatisation — but I’d probably say fragmentation.” 

The break-up of the network is perhaps the most hotly debated legacy of the sell-off. Instead of pushing British Rail into the private sector as a single regulated monopoly akin to water or electricity, the government chose to break it into three components of track, rolling stock and train operators, and then to sell it in no less than 100 pieces between 1995 and 1997. 

This process has not made the network cheaper to operate. The cost of running the UK’s railways is 40 per cent higher than it is in the rest of Europe, according to a 2011 government report by Sir Roy McNulty, the former boss of UK aviation group Short Brothers who has long experience in transport regulation. 

“The train you catch is owned by a bank, leased to a private company, which has a franchise from the Department for Transport to run it on this track owned by Network Rail, all regulated by another office, and all paid for by taxpayers or passengers,” says John Stittle, a professor of accounting at Essex university. “The complexity is expensive.” 

Since privatisation, the bill has mainly been shared between the taxpayer and the passenger. The contribution from the state has almost doubled from £2.3bn in 1996 to £4.2bn in real terms in 2016-17, despite a conscious decision in recent years to push more of the cost on to users’ shoulders. Ticket prices have risen: they are now 25 per cent higher in real terms than in 1995 and 30 per cent higher than in France, Holland, Sweden and Switzerland. The latest average rise in fares of 3.4 per cent, announced on New Year’s Day, was greeted with outrage. 

Privatisation was supposed to unleash efficiencies that would justify the returns private operators demand for their services. So why, more than two decades in, have the UK’s railways not delivered more? 

Despite the vastly expanded usage, the network’s costs have not obviously come down relative to its income. According to the 2011 report, unit costs per passenger kilometre were roughly 20p in 2010, much the same as they were in 1996. 

One reason, suggest the critics, is that privatisation never really took root. The network’s 2,500 stations and 32,000km of tracks were initially vested in a listed company, Railtrack, which collapsed in 2001. The infrastructure has since been back in public hands under the guise of Network Rail. 

Fragmentation, meanwhile, has encouraged each part of the system to prioritise its own profits rather than collaborating to improve the system. “It’s an adversarial relationship with Network Rail,” says one director of a rail franchise. “We call them blame departments. People who sit around at Network Rail and the train companies deciding whose fault it is.” 

Indeed, the subsidies in effect insulate the operators from those extra expenses the network incurs. While it cost £4.1bn to provide maintenance and renewals work on the system in 2016-17, the train operators paid £1.5bn to access the nation’s tracks. This is half of what they paid at privatisation, even though those tracks are now far more heavily used. 

Of the parts of the sector that remain in private hands, it is the train operators that are now the subject of fiercest contention. Although the data on quality are mixed, with the UK performing better than some European countries in terms of punctuality and reliability, there is a perception that service is poor despite all the public subsidies. 

Journeys are often uncomfortable: 23 per cent of customers commuting into London at peak hours have to stand. According to the consumer group Which?, delays of at least 30 minutes afflicted more than 7m journeys last year. 

Critics argue that train operators are able to make returns, and pay themselves dividends, despite contributing very little in the way of risk capital. While operating margins of 3 per cent are not high, the train companies paid nearly all the £868m operating profits between 2012-13 and 2015/16 as dividends — £634m in the four year period. 

The train operators have few tangible assets and almost no exposure to business risk. Indeed, their franchise agreements frequently offer revenue protection should there be an economic decline or changes in London employment levels — the two biggest drivers of passenger numbers. 

What the private owners mainly deliver is marketing nous; promoting services and experimenting with timetables and branding. While more than a third of ticket prices are set by the government, they have freedom to set the remainder at levels they believe the market will bear. 

So deep is the dissatisfaction that one group of long-suffering customers who will pay up to £4,696 this year for a season ticket on the poorly performing Southern service between London and Brighton, just an hour away, created a musical dubbed “Southern Fail”. Following a series of strikes, the satirical website The Daily Mash said Southern had decided to “replace the timetable with an avant-garde poem”. 

As with other privatised monopolies, competition was supposed to ensure lower prices and sharper services. But in recent years this has faded, raising questions over the legitimacy of the franchising system. A third of train operating companies now hold their franchises by so-called “direct awards” from government, rather than auction. 

Successive governments, out of an apparent desire to keep the private sector onside, have been reluctant to wield their powers against poorly performing franchises. Only one train operator has ever been stripped of its contract — Connex for poor performance in south-east England in 2001 and 2003. Three more have walked away after overbidding for contracts, with minimum penalties. 

Last month, the government allowed Virgin Rail and Stagecoach to terminate their East Coast line franchise three years early, saving them the need to write a £2bn cheque to the government under previously agreed revenue growth forecasts. Yet with only a handful of operators bidding for franchises, the duo may end up operating the line again — on more profitable terms. 

Lord Adonis, a Labour peer who recently resigned from the National Infrastructure Commission, called the “bailout” a “scandal” that “threatens to undermine the legitimacy of the whole franchising system”. He argues that the government should keep a state-owned operating company in reserve, to demonstrate to franchisees that it can reassume their obligations if they fail. 

When National Express handed back the keys to the East Coast line franchise in 2009, it was renationalised under an arm’s-length government body called Directly Operated Railways. Nevertheless, during the following five years under state control, it increased ticket sales, returned about £1bn to the taxpayer and delivered record levels of customer satisfaction. 

The rolling stock — which is leased to the train operators for about £1.5bn a year — is still largely owned by three companies: Angel Trains, Porterbrook and Eversholt. Each is in the hands of financial investors, each with convoluted multi-tiered, overseas ownership structures, sometimes making tracing the flow of money difficult. Eversholt is owned by a Hong Kong company with a Cayman Islands subsidiary; Angel mostly by Luxembourg-based investors; and Porterbrook by another consortium of international investors. 

The Competition Commission concluded in 2009 that the rolling stock companies could have cost the taxpayer as much as £100m a year by overcharging operators on leasing rates. More recently, the government has attempted to procure some new trains directly using complex private finance initiative deals — which cuts the rolling stock companies out of the process — although that too has been criticised as poor value for money by public spending watchdogs. 

The government’s micromanagement of procurement has also slowed the pace of ordering, meaning the average age of rolling stock has almost doubled since 2008 to 21 years — roughly the same age as pre-privatisation. 

There is a growing consensus among both executives and industry experts as well as the public that Britain’s unique attempt to create competition on Britain’s rail network has not delivered. 

While it has led to more services, and encouraged more users to pay higher prices, it has not unleashed the productivity improvement necessary both to upgrade the network and stabilise the network’s finances. 

Over the same period, for instance, London’s state-owned metro network, Transport for London, has grown just as quickly and delivered much more state-of-the-art investment.  

This has brought forward calls for more chopping and changing. To deal with the problems of co-ordination and planning, Chris Grayling, the transport secretary and an advocate of private sector involvement, is pressing for formal joint ventures between private franchises and Network Rail on some routes, so that eventually operators can take more responsibility for the tracks. 

Another option — advocated by some franchise holders — is to ape the way Transport for London commissions services from the private sector, taking the revenues and responsibility for service delivery, while contracting out bus and train provision on tightly specified terms. 

Some argue there is a simple solution: reunite track and train in the only feasible manner, a return to public ownership. 

Jeremy Corbyn, the opposition Labour leader, has proposed putting the franchises back under state control as they expire and commissioning trains directly from manufacturers. An October poll by the conservative think-tank Legatum found nearly three-quarters of the UK population agreed with him. 

Labour’s critics, however, say that its plans would do little to solve the well-known failings of Network Rail. “The thing that makes me laugh is how people have forgotten how they used to hate BR,” says Lord Freud. “It was a national laughing stock.” 

As for Lord Adonis, he argues that further revolutionary change is pointless and “no simple ownership change can fix the railways”. 

But back in Carlisle, Mr Johnstone, who now works for the Northern franchise currently run by Deutsche Bahn-owned Arriva, supports a return to state control. “If you scrape the paint off, eventually you get to British Rail. But before you get to British Rail you get to the last time Arriva had the franchise about three coats in,” he adds. “If you keep painting them they won’t make it through the tunnels — there’s that many layers of paint on them.”

What could train company owner Richard Branson possibly have to gain by attacking pro-nationalisation Jeremy Corbyn?

Holly Baxter in The Independent

Watching the absurdity that is TrainGate unfold last night, I couldn’t help but feel that this was a real David and Goliath moment. Isn’t it nice when a billionaire tax-avoiding business magnate with a knighthood takes on a cruel and calculating powerhouse like Labour’s autocratically-minded leader of the opposition and wins? Isn’t it heartening to see the mainstream media take Richard Branson’s side for once, rather than deferring to the statements of a political figure who probably has lots to gain financially from the renationalisation of the railways? After all, it’s not like Branson, the owner of a private company that operates trains, would be affected by things like that. So I think we can all agree that, at the very least, his motives are pure and driven by a rigorous pursuit of objective justice and truth. As for Corbyn, who knows what devious schemes he could have up his sleeve once he’s allowed to hand control of some public transport back to the taxpayer? Isn’t that how Nazi Germany started?

As a born-and-bred Geordie who moved to London for university and stayed for work, I’ve taken the same Newcastle-bound train from London that Jeremy Corbyn sat on the floor of more times than I could count. In case anyone’s actually interested, I can categorically state that it was a lot more pleasant affair when East Coast Trains – the last nationalised arm of British railways – was running the show. The first thing that happened when it was sold off to Virgin was that prices went up and the loyalty scheme which allowed you to accrue points and use them to buy future journeys was stopped (it was replaced with a Nectar Points collaboration and a scheme that encourages you to collect Flying Club miles – two laughable air miles per £1 spent – which, you guessed it, can only be used on Virgin Atlantic planes).

Virgin might have released a press release (yes, for real) about Jeremy Corbyn’s journey this week, claiming that he’d find brilliantly cheap rail fares on their trains in future if he booked in advance, but the £120 return ticket to Durham that I bought weeks in advance for a friend’s wedding this weekend isn’t an anomaly. London to Durham is a journey of two and a half hours. The ridiculous fact that £90 is the cheapest I’ve ever seen a return ticket for it since Virgin took over speaks for itself.

Whether Corbyn sat on the floor to make a point, or because he didn’t look properly in all of the coaches for free seats, or because there were a couple of seats dotted about but he needed a few together for his team is immaterial to me. I’ve spent more than one Christmas Eve sitting curled up inside the luggage rack on the four-hour slow service back to my hometown because even the corridors are too packed to fit into, and I’ve paid extortionate amounts for the privilege. I know what Virgin Trains’ service on the east coast lines are like, even at their least crowded and their very best. A chirpy press release is, of course, going to talk up the “excellent offerings” available from London to Newcastle – but those people have never tried to eat one of their microwaved paninis or operate their on-board wifi, which, to put it kindly, exists more in the conceptual than the physical plane.

Privatised railways are a win for big businesses for obvious reasons: you can’t operate more than one train on one part of a railway line at one time; it’s not like selling a number of competing products together in a shop. Since new lines are hardly ever built, all a business really has to do is have enough money to buy up a monopoly on people’s journeys through whichever part of Britain it chooses. Then – hey presto! – guaranteed sky-high prices with the potential to increase exponentially, since your customer base has very little choice in the matter but to pay up or not travel at all. It’s a naturally uncompetitive business, which makes it a very good candidate for nationalisation and a very good profit-maker for companies with their eyes on the prize. Rail ticket prices, after all, go up like clockwork every year.

Astounded as I am by the fact that people have leapt on what is essentially one of the most boring political stories to have ever hit the headlines, I do support Corbyn’s policy of rail nationalisation in theory. Whether he sat on the floor and announced to camera that ram-packed trains are “a problem that many passengers face every day” as a publicity stunt or after only a half-hearted poke around for seats doesn’t concern me; the simple fact is that the statement is true.

What does concern me, however, is the way in which a discussion about one man sitting on the floor of a packed train has escalated into something which people are now referring to as TrainGate by anti-Corbyn factions, as if accidentally walking past a couple of unreserved seats on a train is genuinely comparable to one of modern America’s most controversial political scandals. I know this has been said a lot in the last few weeks, but really, Labour, have you lost your mind?

Southern is a story of rail failure. But the real agenda is to crush the unions

This is the most farcical privatisation even by the comedic standards of British railways – and the aim is to defeat one of the last holdouts of organised labour

 

Illustration by Nate Kitch


 Aditya Chakrabortty in The Guardian


You work in an office, study at a further education college, want to visit your nan in her care home. Whoever you are, wherever you go, you rely on the trains to take you there. Except you can’t rely on them – not at all.

The only thing predictable about the service is that it’s always awful: the train you want is odds-on to be late or cancelled. If the next one is running, it’s so crammed you can’t get on. Every commute brims over with aggro. Wedged in overcrowded carriages, fellow passengers suffer panic attacks. The local newspaper reports how other commuters have missed work so often, they’ve lost their job; how students have missed exams or holidaymakers haven’t made flights.

Rail minister resigns as Southern commuter chaos continues



You read about a single mother forced to give up being a lawyer in London because dodgy trains mean she can never get home to put her son to bed. And you and everyone else are paying thousands each year for this shambles. To stand for dozens of miles and have extra hours, needless anxiety and gratuitous misery added on to your daily commutes.

If any of this sounds like you then my commiserations – for you are obviously a Southern Railway passenger.

At any other time, this summer’s chaos on the trains would have dominated the front pages. Even amid the turbulence of Brexit, it is still producing political ructions as big as the 50-foot hole that opened up under a south London track yesterday. This month, the transport select committee held an emergency sessionto find out why the service is in meltdown. Last week MPs staged an urgent debate in Westminster Hall, where they laid into Southern as a “joke”, “awful”, “terrible” and “rubbish”. Then they lambasted the government.

In turn, Claire Perry admitted she was “ashamed to be the rail minister”, but vowed to try to fix the situation “until I am kicked out”. The very next evening she quit. The new transport secretary, Chris Grayling, spent Monday hurriedly holding meetings on Southern, which is “top of [his] priority list”.

Britain is hardly short of political crises at the moment, but Southern surely counts as one. In an era of private-sector failure, this is one of the most extensive. Consider: Southern runs among the most economically important train services in the country. It manages 156 stations, covers 414 miles of track, and is responsible for around 600,000 journeys each day.

And it’s part of the largest train franchise in Britain, Govia Thameslink. Also known as GTR – majority owned by the Go Ahead group – it ferries commuters from across the south coast into London Bridge and Victoria. It takes tourists and business travellers to Gatwick and Luton airports. Its empire stretches from Peterborough to Tonbridge to Bognor Regis and Brighton. In a country that has, stupidly, bet everything on London, GTR is utterly crucial to the national economy.

And it does an appalling job. It cancels more trains than all the other rail firms in Britain put together. It boasts the worst record on significant lateness. It is the worst performing train operator of the lot. And it shows little sign of improving.

Its response last week to the cancellation of so many Southern trains was to issue a new timetable, removing one in six of its trains. Of all the oddities thrown up by rail privatisation, this must rank among the oddest: a train company in the business of running fewer trains.

Southern rail passengers protest at Victoria station, London, July 2016. Photograph: Matthew Chattle/Rex/Shutterstock

Perhaps the sheer stretch of GTR’s network is part of the problem, even though Perry claimed just two years ago that that would help it “deliver a step-change on key routes”. Running services into London Bridge during a botched overhaul hasn’t helped. And going by the evidence GTR has given to parliament, it also inherited investment-starved services. But GTR’s boss Charles Horton comes from failed franchise Connex. In his first interview in his current job, he advised passengers forced to stand to take a later or slower service. And with staff morale at rock bottom he has ended up in a huge clash with the unions.

Southern has been crippled by industrial action. Horton also regaled MPs with stories of “sick-note strikes”, although David Boyle – whose blogs on the Southern mess have become a must-read – has found no evidence to back that up. Boyle instead discovered that employees are so fed up they will no longer do voluntary overtime – leaving the company with too few staff for its advertised services.

But the fundamental problem must be the most farcical privatisation even by the comedic standards of British railways. Because this is privatisation in name only. GTR is paid billions by the government – which then takes their ticket receipts and even refunds customers if the trains are delayed. This makes it unlike any other train company in Britain – and gives GTR no incentive to attract more customers or to stop annoying them. In effect, Horton and his executives are government agents paid lavishly for failing to provide a service.

‘Southern cancels more trains than all the other rail firms in Britain put together.’ Photograph: Alicia Canter for the Guardian

We have a transport company that can’t really transport, and vast management fees paid to executives who clearly can’t manage. And the government acts as an apologist for a private company that’s meant to be providing a public service. Meanwhile, no apologies are forthcoming – in fact the boss of Go Ahead, David Brown, has just seen his annual pay soar above £2m, and the dividend payout to his shareholders has jumped to £37m. Someone is making a lot of money out of grotesque failure.

This is not just an issue for southern commuters, though – it’s a montage of everything wrong with business in Britain. Rather than strip GTR of its franchise, Tory ministers have instead made its conditions less onerous. Brown should be hauled in front of parliament to explain the chaos. Instead, he acts like an absentee landlord while officials at the Department for Transport say they couldn’t run the service as well as Southern does.

The question is why the government is going so easy on a failed train company. One answer comes from GTR’s dispute with the unions. The train firm wants to bring in driver-only trains, without guards to open and close the doors. The idea commands enthusiasm in Whitehall. It would certainly make rail management cheaper, if not safer.

But to strip trains of conductors requires the crushing of one of the last holdouts of organised labour. That’s not my extrapolation – it comes from DfT director Pete Wilkinson, who a few months ago told a public meeting, “We have got to break them [union members]. They have all borrowed money to buy cars and got credit cards. They can’t afford to spend too long on strike and I will push them into that place.”

Civil servants are supposed to be impartial, but this one wants to drive trade unions “out of my industry”. Mind you, Wilkinson has worked in Whitehall as well as in the City. He lives in Vienna but commutes to Britain. He’s a gamekeeper comfortable setting policy for the poachers. And he and his colleagues appear to be using Southern to take on the unions, in much the same way Thatcher used Ian MacGregor and the National Coal Board to break the miners.

An industrial dispute by proxy, a dysfunctional privatisation pushed by ideologues: our railways are in for an 80s revival for all the wrong reasons.

25 Best British Jokes

From The Telegraph

1. “I’ve been single for so long now, when somebody says to me, 'Who are you with?’, I automatically say: 'Vodafone.’”

Miranda Hart

2. “I went to a restaurant that serves breakfast at any time. So I ordered French Toast during the Renaissance.”

Peter Kay

3. “A friend of mine always wanted to be run over by a steam train. When it happened, he was chuffed to bits.”

Tim Vine

4. “I thought when I was 41, I would be married with kids. Well, to be honest I thought I would be married with weekend access.”

Sean Hughes

5. “I heard a rumour that Cadbury is bringing out an oriental chocolate bar. Could be a Chinese Wispa.”

Rob Auton

6. “I lost my virginity very late. When it finally happened, I wasn’t so much deflowered as deadheaded.”

Holly Walsh

7. “I’m sure wherever my dad is he’s looking down on us. He’s not dead, just very condescending.”

Jack Whitehall

8. “Hedgehogs. Why can’t they just share the hedge?”

Dan Antopolski

9. “Try shoving an ice-cube down your wife’s front at night. 'There’s the chest freezer you wanted.’”

Ken Dodd

10. “You know who really gives kids a bad name? Posh and Becks.”

Stewart Francis

11. “Most of us have a skeleton in the cupboard. David Beckham takes his out in public.”

Andrew Laurence

12. “I’ve just been on a once-in-a-lifetime holiday. I’ll tell you what, never again.”

Tim Vine

13. “I needed a password eight characters long so I picked Snow White and the Seven Dwarves.”

Nick Helm

14. “I waited an hour for my starter so I complained: 'It’s not rocket salad.’”

Lou Sander

15. “I told the ambulance men the wrong blood type for my ex, so he knows what rejection feels like.”

Pippa Evans

16. “I’m in a same-sex marriage… the sex is always the same.”

Alfie Moore

17. “A sewage farm. In what way is it a farm? Is there a farm shop?”

Jack Dee

18. “There are only two conditions where you’re allowed to wake up a woman on a lie-in. It’s snowing or the death of a celebrity.”

Michael McIntyre

19. “For boys, puberty is like turning into the Incredible Hulk - but very, very slowly.”

John Bishop

20. A big girl once came up to me after a show and said 'I think you’re fatist.’ I said 'No. I think you’re fattest.’

Jimmy Carr

21. “In the Bible, God made it rain for 40 days and 40 nights. That’s a pretty good summer for us in Wales. That’s a hosepipe ban waiting to happen. I was eight before I realised you could take a kagoule off.”

Rhod Gilbert

22. “No wonder Bob Geldof is such an expert on famine. He’s been dining off 'I Don’t Like Mondays’ for 30 years.”

Russell Brand

23. 'Toughest job I ever had: selling doors, door to door.’

Bill Bailey

24. “Dogs don’t love you. They’re just glad they don’t live in China.”

Romesh Ranganathan

25. “I was playing chess with my friend and he said, 'Let’s make this interesting’. So we stopped playing chess.”

Matt Kirshen

George Osborne's 'Austerity begins at home' example

George Osborne raises standard in first-class train row

Treasury account of chancellor's aide finding ticket inspector to pay for upgrade on Virgin train contradicts reporter's version

• Robert Booth, Lizzy Davies and Rajeev Syal
• The Guardian, Friday 19 October 2012 20.36 BST

George Osborne is accused of 'great train snobbery' after journalist says aide told ticket inspector the chancellor 'could not possibly' sit in standard class but could not pay any extra.

George Osborne's face was fixed in a thin grin as he was jostled across platform two at Euston last night, but inside he must have known that a political bomblet had just gone off. Shortly after 5.17pm, as the chancellor alighted from the busy Virgin Pendolino train from Wilmslow, Cheshire, in his Tatton constituency, the reality of what had already been labelled Plebgate 2 became clear.

As Osborne's train rattled through the countryside an hour and a half earlier, a tale of apparent fare dodging by the chancellor – estimated to have a personal wealth of £4m – had emerged through Twitter.

Rachel Townsend, a correspondent for ITV's Granada Reports programme, had been travelling on the same train and tweeted: "Very interesting train journey to Euston. Chancellor George Osborne just got on at Wilmslow with a standard ticket and he has sat in first. His aide tells ticket collector he cannot possibly move and sit with the likes of us in standard class and requests he is allowed to remain in First Class. Ticket collector refuses."

Was it true? Had Osborne, moments before the Tory chief whip, Andrew Mitchell, was forced to resign for reportedly calling a policeman a pleb, really refused to sit in standard, triggering a story that was quickly labelled The Great Train Snobbery?

Virgin, which in August had to swallow the government's decision to remove its franchise for the west coast mainline, which Osborne had just used, confirmed that he had travelled in first class on a standard class ticket, initially at least.

"The chancellor, who was travelling in first class accommodation, held a standard class ticket," a spokesman for Virgin said. "As soon as the train left Wilmslow, an aide went to find the train manager to explain the situation and arrange to pay for an upgrade. It was agreed that the chancellor would remain in first class and an amount of £189.50 was paid by the aide to cover the upgrade for Mr Osborne and his PA. The situation was dealt with amicably between the train manager and George Osborne's aide. At no time was there a disagreement or a refusal to pay for the upgrade. Nor was there any discussion between the train manager and Mr Osborne."

It chimed with the Treasury's account. "The chancellor got a different train than planned due to diary change following a series of meetings in his constituency," a spokesman said. "As he had no seat reservation on the new train, which was crowded, he decided to upgrade – and obviously intended and was happy to pay. An aide sought out the train manager and paid the ticket upgrade."

But that clashed with what Townsend said. She told ITV: "Then his aide approached the ticket collector right next to me. He said he is travelling with George and he has a standard ticket but can he remain in first class? The guard said no. The aide said Osborne couldn't possibly sit in standard class. The guard replied saying if he wants to stay it's £160. The aide said he couldn't pay and he couldn't really sit in standard. The guard refused to budge. The guard went on gathering tickets and later told me Osborne had agreed to cough up the £160."

Fellow passengers were unimpressed with the reports. "Fair's fair. He should be saving the taxpayer money but definitely he shouldn't be sitting in first," said Justin Bateman, 34, a civil servant from Manchester. Keith Young, 60, a doctor from London, agreed. "Standard was busy and the chancellor would not have been able to sit alongside his aides, but he would have been able to occupy a single seat alongside the other passengers." He added: "It's one rule for them and one rule for us. He had no right to make a stand against paying an upgrade."

But even as the facts were still settling, Labour seized on the tale.

"Another day, another demonstration of how out of touch this government is," said Michael Dugher, the shadow Cabinet Office minister. "Just like Andrew Mitchell, George Osborne obviously thinks that it is one rule for him and another for the plebs he is so keen to sit apart from. So much for 'we are all in it together'."

As with Mitchell's rant at the Downing Street police, the spirit of Boris Johnson loomed. In Mitchell's case it was quickly pointed out that the mayor of London had once called for people who swear at police to be jailed. Now memories turned to the Tory darling's scathing attack last year on what he called the "parasitic scourge" of fare dodgers in London.

At a teeming rush-hour Euston, as Osborne's train was due to arrive in London, a feverish posse including Labour activists, the president and vice-president of the National Union of Students and assorted press were waiting to pounce. Officers from the Metropolitan police's specialist response unit pored over train timetables to try to work out which service the chancellor was on to make sure he was spirited away in safety.

"Are you embarrassed Mr Osborne?" shouted an anti-government activist who had rushed to the station after hearing the rumour about the chancellor.

As he was ushered across the platform by aides and security, the chancellor had very little to say. "I'm sure it will be, um …" was all he could tell the Guardian as he was shepherded through a security gate and past the bins towards a waiting government car.