Its fears that the initiative could lose out came as Plaid Cymru warned this week that Wales had received the “worst financial settlement” since devolution from the Treasury. Assembly spending will go up from pound;14 billion to pound;16bn by 2010 following Alistair Darling’s first comprehensive spending review as Chancellor.

But although spending will rise, it will be slower than previously, making tighter budgets inevitable.

Steve Thomas, chief executive of the Welsh Local Government Association, said public services would be squeezed as a result of the CSR announcement.

But David Evans, secretary of the NUT Cymru, said the union would monitor the extra money for education and skills coming to Wales. “The Chancellor announces more money for Wales,” he said. “The Assembly government decides its own priorities and then allocates money to local authorities, some of whom do not see education as a priority.”

“The foundation phase cannot be done on the cheap and a substantial increase in early years is needed and local authorities are essential in seeing that happen.”

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