Chancellor George Osborne has been forced to pay a £160 train ticket upgrade after sitting in first class with only a standard ticket.

The Chancellor boarded the train to Euston at Wilmslow, Cheshire, before settling into first class with his special adviser.

He was then challenged by a ticket collector who refused to allow the Chancellor to remain in his premium-priced seat unless he paid the extra amount.

Osborne's special adviser came to his aid saying the Chancellor, who is number three politician in the Cabinet, could not possibly remove himself to sit among the general public in standard class for the two hour journey to London.

The embarrassing gaffe, described as a "stand-off", was observed by ITV reporter Rachel Townsend who tweeted the exchange between the Tory MP and the ticket collector.

The journalist 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 CLASS."

She said: "George Osborne got on the train with aides at Wilmslow and went straight to first class.

"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."

Townsend asked the ticket inspector whether he would allow Osborne to stay in first class without paying, to which the ticket inspector apparently replied: "No chance."

Mr Osborne paid the upgraded fare, but has so far declined to comment.