Talks between Fianna Fáil and Fine Gael will reach a crucial point today when the two parties begin to discuss policy issues.

The negotiating teams met for four hours on Tuesday and exchanged discussion papers on how a minority government would work.

However, it is understood the discussions planned for today will centre on policy proposals by the parties – including on Irish Water, housing and the health service.

A source with knowledge of the discussions said: “The talks have been proceeding well. Wednesday is going to be the deciding day.

“The agenda will move from mechanism to policy issues. That is why it is going to be key to whether or not there will be a successful outcome.”

It is unlikely the negotiations will conclude in time for tomorrow’s vote for taoiseach, with some speculation the vote could be deferred.

A senior Fine Gael source said there was a 30 per cent chance the talks would be finished by tomorrow.

The two parties received a setback as it emerged the five rural TDs are unlikely to vote as a group and Independent Alliance TD John Halligan is said to be close to leaving the process.

Not participating

Mr Halligan is understood to have told colleagues in the alliance he will not be participating in any further discussions with either Fine Gael or Fianna Fáil until agreement on 24- hour cardiac care for Waterford Regional Hospital is reached.

Fine Gael started contacting the 15 Independent TDs on Tuesday urging them to make their position on which party they would support in a minority government known before tomorrow. The party met the Independent Alliance last night who requested a series of changes be made to the draft document presented by the party last week. Galway East TD Seán Canney said a number of things were included in the paper that were not discussed and others were left out.

The alliance also requested that Fine Gael appoint a senior minister for disability or a super junior who would sit at the cabinet table.

The rural deputies, Roscommon TD Denis Naughten, Tipperary TD Mattie McGrath, Clare TD Michael Harty, Galway TD Noel Grealish and Cork South West TD Michael Collins, also confirmed they will not vote as a group.

It is understood Mr McGrath and Mr Naughten have not spoken since a disagreement late last week. Mr Naughten and Mr Harty are said to be in support of Mr Kenny and the other three members are not.

Eighth amendment

Mr Collins, Mr McGrath and Mr Grealish are unlikely to support Fine Gael due to its proposal to establish a citizens’ convention to examine the Eighth Amendment of the Constitution.

Fine Gael also agreed on Tuesday to reach out to the Social Democrats, the Green Party and the Labour Party again to seek their support for a minority government from the Opposition benches. Labour will hold a meeting of its parliamentary party tomorrow to consider if it will support Enda Kenny in the vote for taoiseach.

The party had abstained in the vote last week but two TDs admitted it may have to re-examine the situation.

It is said to be opposed to re- entering government, despite repeated approaches from Fine Gael, but it may be willing to support a minority government on a case-by-case basis.

The Social Democrats also held a meeting on Tuesday but agreed it would not support Mr Kenny or Fianna Fail leader Micheál Martin if he is proposed in a vote tomorrow.

Fine Gael is to hold a parliamentary party meeting at 5pm today to inform TDs of any updates in the discussions.