Charges against independent MP Geoff Shaw have been dropped, strengthening the Victorian government’s position in the knife-edge parliament.

The Victorian coalition’s narrow grip on government is a little safer after criminal charges were dropped against the man who holds the balance of power.

Independent MP Geoff Shaw was facing 24 dishonesty charges over the alleged misuse of his parliamentary car and fuel card, and if convicted would have lost his seat in parliament, triggering a by-election that could have brought down the government.

But in a shock move on Tuesday, prosecutors dropped the case.

“I was very pleased,” a relieved Mr Shaw told reporters outside his Frankston office.

“It just means I just go about doing what I do at my home here in Frankston. That’s doing the best I can for this great area.”

Director of Public Prosecutions John Champion SC said he withdrew the charges after deciding there was not a reasonable prospect of criminal conviction in the matter.

Mr Shaw may still be found to be in contempt of parliament by parliament’s privileges committee, which is examining the matter after Ombudsman George Brouwer found the MP used his parliamentary car for commercial purposes.

Acting Opposition Leader James Merlino said that after the scathing ombudsman’s report into the matter, it was a very convenient decision for Mr Shaw and Premier Denis Napthine that the only penalty would come from parliament.

“Most Victorians will think that something stinks about this decision,” Mr Merlino told reporters.

“It is hard to understand at how, at this late stage in the process, the DPP doesn’t think there is a reasonable prospect for a conviction.

“How can it be right that the only sanction Geoff Shaw will receive is a wet-lettuce slap on the wrist from a parliamentary committee dominated by his Liberal mates?”

Corrections Minister Edward O’Donohue said the decision not to proceed with charges was made by an independent body.

“The DPP is independent of government and it’s made its decision based on the material at its hand.”

Prosecutors last month consented to a defence request that Mr Shaw’s charges be dealt with by the court diversion program.

But Magistrate Charlie Rozencwajg rejected the agreement that would have allowed Mr Shaw to avoid a guilty finding and therefore be allowed to keep his seat.

Mr Shaw did not rule out returning to the parliamentary Liberal Party on Tuesday, saying he hadn’t closed his doors at all.

But Mr O’Donohue does not expect he will be back.

“I think the premier has said previously very clearly, he does not anticipate any situation where Geoff Shaw would come back into the parliamentary Liberal Party,” Mr O’Donohue said.

The privileges committee suspended its investigation while the matter was before the courts but said in a report last week that it had not come to any conclusions about the allegations against Mr Shaw.