There were “crumbs of comfort” for schools and education services this week, according to the Welsh Local Government Association as local authorities were dealt below-inflation budget settlements from the Assembly government for 2009-10.

The settlements will come as a further blow to Welsh local authorities as it emerged that nine have ollectively more than Pounds 60 million of public money tied up in failed Icelandic banks. It is now yet known if public services, including education, will bear the brunt of the lost cash, currently frozen in the banks.

The Assembly government allocated an extra Pounds 10 million for 2009-10 to all authorities in response to rising costs in this week’s settlement, but the association fears it is not is not enough to beat the credit crunch.

The total budgets for authorities went up by Pounds 109 million - an average increase of 2.85 per cent - while inflation reached 5.2 per cent earlier this week. Even authorities with the highest increase - including Cardiff and Bridgend - are predicted to struggle. The association said the extra money would not cover rising energy costs.

The draft budget includes Pounds 60 million for the foundation phase and Pounds 3.7 million to extend free school transport as part of the Assembly government’s learner travel measure.

But there was a warm welcome for the foundation phase cash. Councillor Peter Fox, the association’s spokesman for lifelong learning, said: “Wales’ children should not pay the price for national budgetary pressures and we are pleased that the Assembly government has recognised this and provided the necessary funding for them to go on and benefit from these revolutionary education changes.”