Acting Taoiseach Enda Kenny and Fianna Fáil leader Micheál Martin will this weekend try to break the political impasse over water charges which is preventing the formation of a Fine Gael-led minority government.

The suspension of water charges is the largest stumbling block to a deal to facilitate Mr Kenny’s election as taoiseach.

Negotiating teams from the two parties broke off talks yesterday evening and outlined their differences to Mr Kenny and Mr Martin.

It was suggested last night that the future of water charges could be referred to a commission or review process.

Fianna Fáil sources said that while a commission could be established, charges must still be stopped for the duration of the Dáil term.

Fine Gael sources said there must be no suspension while a commission carried out its work.

Both teams are understood to be on standby for more talks over the weekend, if given the go-ahead to resume by Mr Kenny and Mr Martin, who spoke by phone last night. The pair are expected to speak again today.

New model

A number of issues also need to be resolved in areas such as education, short-term housing, rural policy and childcare.

The most difficult, however, remains water charges, with Fianna Fáil sources saying the party wants their “immediate suspension” and “effective end”.

It is understood that Fine Gael has conceded a new model of charges should be introduced, which would be based on consumption but with generous allowances to significantly reduce the cost of charges.

The current €100 water conservation grant would be replaced with increased allowances. A flat charge would still apply for those without meters, while the metering programme would continue.

Fine Gael sources expressed frustration that Fianna Fáil would not negotiate an alternative charging regime.

Fianna Fáil has sought to tie the water issue to the length of time the party is prepared to facilitate a Fine Gael-led minority government.

Fine Gael wants Fianna Fáil to sign up to a five-year arrangement, while Micheál Martin wants it reviewed in the summer of 2018.

Fianna Fáil this week said it would be willing to agree to a three-year arrangement – the length of time requested by Independent TDs whose support Mr Kenny needs – if Fine Gael agreed to suspend water charges for the duration of the Dáil.

Other differences are said to exist on childcare. Both parties want to reduce the cost by €2,000 but Fianna Fáil favours tax credits and Fine Gael wants subsidies.

Housing differences were said to centre on measures for short-term difficulties, such as rent supplement. Banking issues, such as standard variable rates and mortgage interest relief, also remain unresolved.