Conservative and Liberal Democrat negotiating teams are to meet again within the next 24 hours following more than five-and-a-half hours of discussions in Whitehall.
Following the discussions, David Cameron and Nick Clegg then held their second face-to-face meeting in 24 hours, seeing each other this time in the House of Commons.
Shadow foreign secretary William Hague emerged from the Cabinet Office to say that they would be briefing their respective leaders on what he described as ‘very positive and productive’ negotiations.
As the meeting broke up, Conservative sources disclosed that David Cameron had spoken again by telephone to Nick Clegg following their 70 minute face-to-face talks last night in Whitehall.
Mr Hague told reporters that the two negotiating teams - which are discussing possible terms of cooperation in forming a new government - had had a wide-ranging policy discussion.
‘We've had some very positive and productive discussions over many key policy areas,’ he said.
‘The issues we have covered have included political reform, economic issues and the reduction of the deficit, banking reform, civil liberties, environmental issues.’
Mr Clegg's chief of staff Danny Alexander emerged a few minutes later, to confirm that they had agreed to have further discussions.
‘We're agreed that whatever any agreement made will have deficit reduction and economic stability at its heart,’ he said.
Mr Clegg also met with Gordon Brown in the Foreign Office today.
Labour and Lib Dem sources said that the meeting followed a telephone call between the two men last night and was intended to update each other on the situation.
Both sides described the discussion as ‘amicable’.
Earlier, Senior Liberal Democrats had warned that the Tories must give ground on the issue of voting reform if they want to strike a deal on the formation of a new government.
Former Lib Dem leader Paddy Ashdown said that there was ‘a mountain to climb’ if they were to get an agreement.
He said that David Cameron's offer of a committee of inquiry into the electoral system would not satisfy Lib Dem demands for reform.
He pointed out that Mr Cameron's offer was no better than that made by Conservative Prime Minister Edward Heath to Liberal leader Jeremy Thorpe when he was trying to form a coalition after the 1974 general election.
Calls for Gordon Brown to stand down
A former Labour minister today called for Gordon Brown to quit, as pressure grows on the Labour leader in the wake of Thursday's election defeat.
Vauxhall MP Kate Hoey - who served as sports minister under Tony Blair from 1999-2001 - said it would be impossible for Labour to achieve ‘renewal’ until it had a new leader.
Her comments follow a call yesterday from Bassetlaw MP John Mann for Mr Brown to stand down as Labour leader and PM, because he was losing the party votes and standing in the way of a credible coalition deal with Liberal Democrats.
They will heighten speculation about how long Mr Brown can hang on in 10 Downing Street.
Ms Hoey criticised the negative tone of Labour's election campaign.
And she said that many voters who backed the party because of its policies and values did so ‘reluctantly because of who our leader was and with a heavy heart and despite us having Gordon as leader’.
She backed Mr Mann's call for the Parliamentary Labour Party to be convened to discuss the party's response to the emergency created by the inconclusive election result.
Mr Mann said: ‘Gordon Brown has had a good run and whilst he was an excellent Chancellor he has been seen as a poor Prime Minister who is out of touch and aloof. Labour lost votes because of this.’
