Cardiff bustles and hums. The capital of Wales - political, cultural, financial - is changing so fast it seems new buildings are rising overnight, the bold millennium shapes dwarfing the flat-roofed monsters from the 1960s and 70s. Although the population covered by the city council remains a relatively modest 327,000, this feels like a big city.

The advent of the Welsh Assembly, and the growth in media and financial services, have attracted many newcomers to the bright lights of Cardiff.

Usually English-speaking themselves, they often seek places in Welsh-medium schools for their children.

But the capital also attracts many who are more difficult to accommodate, the homeless and single, who live in hostels and lodging houses around the city centre, the young who have run away from home or from care, asylum-seekers (550 pupils at the last count) and some 600 gypsy travellers.

They have joined the substantial number of Cardiff’s inhabitants who already live in poverty. For the pace of economic change has been as rapid as the changes in the city’s skyline and has left many behind. More than a quarter of children live in households dependent on means-tested benefit.

Over the past 10 years, many well-paid, semi-skilled jobs in manufacturing have been replaced by a huge growth in the relatively low-paid service sector, including hotels and catering and call centres.

So, while the biggest of Wales’s 22 local education authorities may be full of vigour and optimism, and average health and social conditions quite good, education in Cardiff also faces challenges on a scale unknown in the others.

This is a place of contrasts, notably between the leafy suburbs and new housing developments of the northern part of the city, and the sprawling urban estates of the “southern arc”.

Contrasting circumstances produce extremes of achievement. Cardiff has some of the highest-achieving schools in Wales and some of the lowest. Truancy levels are the highest of any Welsh LEA.

But the education authority is determined to tackle these challenges (although council leaders complain that it needs a more generous settlement from the Assembly to do it properly) and we show in the next few pages some of the ways in which it is succeeding.

Working in partnership with schools, it has already made major strides in the primary sector, especially in the early years, where key stage results have improved twice as fast as the average for Wales since 1997. The Cardiff literacy, numeracy and science strategies have all succeeded in pulling up performance in the core subjects.

Now primary teachers and advisers are poised to seize the opportunities offered by the ending of key stage tests and the introduction of a new, less-formal foundation phase for three to 7-year-olds.

The authority’s energetic advisory service emphasises school improvement through innovation. This, together with Cardiff’s vigorous study-support strategy, and schemes offering vocational alternatives for pupils at 14-plus, are also reaping rewards in secondary schools, although they have not yet brought Cardiff’s GCSE results up to the Welsh average.

Targeted initiatives are making slow but steady inroads into the truancy figures. As befits the cultural capital of Wales, the creative arts are flourishing, especially in primary schools.

The fate of the two schools that scored the worst GCSE result - 6 per cent getting five or more A*-C grades - eight years ago is instructive.

One (Glan Ely) failed two inspections and closed, to rise again as Michaelston community college, the nearest thing the authority has to an all-service school, which has health and welfare services, childcare and family learning on site. The other (Willows) has gone from strength to strength (page 17).

When Estyn, the Welsh schools inspectorate, came to call last year, it found much to praise in the authority, including good leadership by senior officers, effective partnerships at local level, good communication with secondary heads and sound financial management.

Its overall judgement of the authority’s strategic management, however, was only “fair”, although with good prospects of improvement. One of the main reasons for that grudging verdict was the authority’s failure to tackle perhaps its biggest challenge of all, falling rolls.

There are some 8,000 surplus places across the city but also an acute shortage of places in Welsh-medium schools, which are often popular with middle-class parents, who consider their standards are higher and who know that bilingualism is the key to jobs in government and the media. Closures and mergers are inevitable and will be painful.

Now, however, after many years of Labour dominance, the council is under Lib-Dem leadership and open consultation on reorganisation is under way.

“This has to be a priority,” says Bill Kelloway, the council’s Lib Dem executive member for education, He points out that, this year alone, Cardiff lost pound;1.3 million in revenue from the Welsh Assembly to reflect the loss of more than 500 pupils. Only half of that loss was passed on to schools.

“We see it as an opportunity to address issues to do with the system,” he says, “such as the demand for Welsh-medium education and the creation of community-focused schools.”

Mr Kelloway, a geography teacher in neighbouring Torfaen, would also like to sort out the mixed system of 11-16 and 11-18 schools within the authority.

“We should end up with a system fit for the 21st century.”