Labour Minister Alan Kelly has defended Irish Water as "a necessity" for the country, as Fine Gael and Fianna Fáil tussle over the future of water charges in talks around forming a minority government.

The Minister for the Environment, who oversaw the establishment of the water utility in the Fine Gael-Labour coalition, was speaking in New York ahead of talks between Fine Gael and Fianna Fáil today to break the deadlock over formation of a government.

Speaking after an event to commemorate the 1916 Rising, Mr Kelly declined to comment on negotiations around the potential scrapping of water charges. “It’s all speculation at the moment,” he said.

“I will reserve judgment until what’s been proposed,” he said. “I certainly believe there is a necessity for Irish Water. The country needs it.”

Mr Kelly said that Fine Gael and Fianna Fáil “need to do their deal” and “if they can’t come to some sort of arrangement, then it is obvious that the Dáil is going to have to deal with that”, appearing to imply that this would result in another general election.

Labour said last week it intended to stay in opposition after days of speculation that the party might consider returning to power with Fine Gael.

Asked whether Labour’s election performance merited a leadership contest, Mr Kelly said that the members always picked the leader.

“We are a very democratic party. The whole issue will be dealt with in due course,” said the deputy leader.