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The performance of the education system in Wales could enter a "downward spiral" without urgent action, according to a report.

Too many schools are "coasting", it says, and standards of literacy and numeracy are too low.

Education Minister Leighton Andrews said the study, from a group he commissioned, had some "hard messages".

It says that some local authorities "lack the capacity" to improve the performance of their schools.

It comes after Welsh 15-year-olds were found to be slipping down the international Programme for International Student Assessment (Pisa) league table.

The report - from a group asked to look at the structure of education services - cites the Pisa evidence and says education in Wales is entering a critical period.

"If urgent steps are not taken, then we could well enter a downward spiral in terms of performance," it says.

It says parents have a "fundamental right" to information about the performance of their children's schools. It calls for the establishment of national floor targets for individual schools.

Standards of literacy and numeracy are significantly lower than they should be in Wales, it says.

Although the group found evidence of exceptional outcomes in certain schools, "there are too many schools that are coasting and some that are failing".

"It appears that some local authorities simply lack the capacity to challenge and support adequately the performance of their schools," the report says. "Such a failing is unsustainable."

It says a system of local authorities co-operating in four regions was a "more effective way forward when compared to 22 authorities trying to resolve issues of delivering educational services, supporting and using resources in an effective way".

The group was hopeful that the learn-through-play foundation phase for under sevens would help raise standards in literacy and numeracy. But it said that without diagnostic testing the phase will "not be well founded".

"If we are not careful standards will regress rather than improve because of the introduction of the foundation phase," it says.

In a statement to AMs, Mr Andrews said the findings would be a matter for the next assembly government after the election on 5 May.

"This report is another wake-up call and we should all give it open-minded consideration," he said.

He said the report was part of an "urgent drive" to shift resources to the classroom. A study by auditors PwC last year found about a third of education spending - or £1.3bn - was swallowed by administration.

Mr Andrews has previously announced plans for a system of grading schools, but insists it will stop short of re-introducing league tables.

Conservative education spokesman Paul Davies said local authorities should be cut out and schools should be directly funded by the assembly government.

"By giving schools greater autonomy I'm confident that we will in return see an improvement in educational standards," he said.

Plaid Cymru AM Leanne Wood said her office had been contacted by parents who could not get their children into over-subscribed Welsh-medium schools.

Liberal Democrat spokeswoman Jenny Randerson said: "This report is certainly very challenging and reaches some very worrying conclusions."

NAHT Cymru director Anna Brychan welcomed recommendations to "streamline" the system and release more funding for schools.

She said: "We look forward to seeing progress on this when the new assembly convenes after the election in May."