The ‘insufficient' funding settlement by the Welsh Assembly Government could saddle Wales with a major cash crisis and bring job losses.

An all-party Welsh Assembly finance committee  this week warned frontline services, including education and health, and the building of new roads, hospitals and schools could be hit hardest.

The committee has urged finance minister, Andrew Davies, to review the settlement.

Councils across Wales were hit with budget settlements last month as low as 1%, and warned council tax hikes between 8% and 10% were ‘inevitable'. Last week, the Welsh Local Government Association and the main teacher unions in Wales issued a joint statement warning of job losses across the board in education, and an adverse impact on school improvements, as a result of the budget.

They warned there could be ‘no expectation' current standards in schools would be maintained, and said the ability to roll out new assembly government initiatives could be severely hampered.

‘If programmes such as the Foundation Phase – three to seven-year-olds – are not implemented properly, the impact on learning at future key stages could be profound,' it said.

This week, WLGA chief executive, Steve Thomas, welcomed the finance committee's report, describing the growth of Welsh public expenditure as the lowest since the establishment of the Welsh Assembly Government.

‘Councils work within a difficult climate where expectation is constantly rising for better public services and pressures for greater efficiencies gains are greater than ever,' he said.

‘There needs to be a sense of realism within the assembly government itself about what councils can deliver when they are already squeezing everything possible out of the system.'

The Welsh Assembly Government has promised to consider the conclusions of the finance committee.