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Jeremy Corbyn attacked Sir Richard Branson as a “tax exile” who was “laughing all the way to the bank” today in a major escalation of the row over whether he was forced to sit on a train floor.

The accusations — denied by Sir Richard’s office — were levelled after the Labour leader’s claims that there were no seats on the “ram-packed” Virgin train were shown by CCTV images to be untrue.

But Mr Corbyn’s embarrassment increased when the challenger for the Labour leadership, Owen Smith, implied that the Left-winger had not told the truth about the incident.

“I’m not quite sure what the Corbyn version of events is because I think it changed a couple of times yesterday,” he said.

“But what is clear from the footage that I’ve seen is that he had a seat on the train, and there were seats on the train, and he chose to sit on the floor.”

The extraordinary row resulted in some of the most damaging headlines yet for Mr Corbyn in today’s papers. However, it did not dim the enthusiasm of backers at a Newham rally last night who chanted “Jeremy, Jeremy, Jeremy” at his appearance.

The incident began when Mr Corbyn travelled with a film-maker on the three-hour 11am Virgin Trains service from King’s Cross to Newcastle on August 11.

He was filmed on the floor, complaining that there were no free seats and arguing that nationalisation would improve services.

But Virgin Trains released CCTV images that appeared to show the Labour leader walking past empty, unreserved train seats.

Mr Corbyn’s campaign manager Sam Tarry — who is a national official with the TSSA rail union — opened fire at Virgin tycoon Sir Richard on the Today programme, saying: “I think it is quite clear, Richard Branson is literally laughing all the way the bank at the British taxpayer’s expense.

“Let’s be clear about what’s going on here. This guy’s a tax exile.”

Referring to rail subsidies, he went on: “In the last year this guy has made around about £53 million direct from the taxpayer.”

Mr Tarry told supporters at the Newham rally last night: “The Establishment are absolutely petrified of what this campaign is about, what this movement is about.”

A Virgin spokesman said that it was not true that Sir Richard was a tax exile.