It is now widely accepted that phonological language skills are a critical foundation for learning to read (decode). This longitudinal study investigated the predictive relationship between a range of key phonological language skills and early reading development in a sample of 191 children in their first year at school. The study also explored the theory that a failure to establish automatic associations between letters and speech sounds is a proximal causal risk factor for difficulties in learning to read. Our findings show that automatic letter-sound associations are established early, but do not predict variations in reading development. In contrast, phoneme awareness, letter-sound knowledge and alphanumeric RAN were all strong independent predictors of reading development. In addition, both phoneme awareness and RAN displayed a reciprocal relationship with reading, such that the growth of reading predicted improvements in these skills.