MPs from the ruling Labour and VVD Liberal parties on Tuesday dropped their support for the cabinet’s plans to increase value-added tax (btw) to 21% on everything but food.

Parliamentary party leader Halbe Zijlstra (VVD) and Diederik Samsom (PvdA) said on Tuesday they no longer backed the plan after talks on tax reforms with four coalition parties collapsed on Monday night.

‘This plan needed broad support and it was not there,’ Samsom said.

‘We were no great supporter of higher btw but were prepared to talk about it,’ Zijlstra said. ‘Without the support, the plan has no future. Entrepreneurs in particular would have been hard hit.

However, the cabinet’s plans to cut income tax and make worker cheaper to employ can go ahead because there is wide support for the measures, the two party leaders said.

Small firms and retailers had reacted furiously to the planned increase in btw, which would have hit a range of service industries and shops.