Unfortunately, yes it is perfectly legal, the ombudsman will say nothing at all. It really wouldn’t surprise me to find that no two VM customers are paying the same price for the same service! There are so many historic discounts, monthly refunds, retention offers in play here.
The £35 is an admin fee for changing a contract, sometimes they waive it, sometimes they don’t - but ultimately, the contact is between you and VM, it doesn’t matter what others are paying, I’m afraid, you either pay the sum requested, or see if you can’t get it waived or decline the upgrade and stay as you are.