Welsh NHS's extra £425m over two years

The Welsh NHS is to get an extra £425m to spend over the next two years, Finance Minister Jane Hutt has announced.

The AM also confirmed the minority Labour administration had struck a two-year deal with the Liberal Democrats to ensure the plans were approved.

Ms Hutt was outlining the Welsh government's annual budget to AMs.

The overall budget was set at £15.33bn in 2015-16, down from £15.37bn the previous year.

The extra NHS spending - £200m extra in this financial year and £225 next year - means there will be cuts in other areas.

Local government is losing £192m compared with this year's budget, with education and skills losing £28m.

Welsh government departments' budget changes for 2015/16 are as follows:

• Health and Social Services +3.5%

• Local Government -4.1%

• Communities and Tackling Poverty -0.43%

• Economy, Science & Transport +1.3%

• Education and Skills -1.6%

• Natural Resources -7.5%

• Central Services and Administration -6.6%

Ms Hutt said: "The choices we must make are not easy and get tougher with each additional cut, but we have been open with the people of Wales about the scale of the challenge."

Analysis: Owain Clarke, BBC Wales health correspondent

For the second year running the health and finance ministers spent the summer looking at the pressures facing the NHS and have presumably come up with a figure - £200m extra this year and £225 extra next year - which they think could help address some of them.

The figure reflects recent analysis by the independent Nuffield Trust which indicated that the NHS in Wales faced a £200m funding gap over the short term, which could rise to £2.5bn in 10 years time.

But bear in mind one of Wales' leading health economists - Marcus Longley of the University of South Wales - estimates that the NHS needs around between £200m and £250m extra a year just to "stand-still" - to avoid a potentially "catastrophic failure of service".

Most of the NHS's money is spent on staff - and a lot of them on contracts which give them incremental rises each year. So unless jobs are cut, or there's a pay freeze, the bill increases. Moves to limit salaries are unpopular - with unions threatening strike action.

But beyond pay - the costs of delivering healthcare invariably rise each year - and more quickly than inflation because the service has to fund new and more expensive drugs and replace medical equipment. Don't forget either we're living longer, putting more strain on the service.

So a big chunk of the extra money for next year could be swallowed up pretty quickly. Particularly so when you consider that the seven Welsh health boards reported a joint overspent of almost £100m in just first few months of the financial year.

Earlier, details emerged of a deal between Labour and the Liberal Democrats to ensure the budget is passed.

Extra funding will be given to the Pupil Deprivation Grant, a scheme to increase school spending in poorer areas.

The Lib Dems said the total deal was worth £223m over two years.

As well as the education cash it includes a pledge to begin building the East Bay Link Road in Cardiff. The £57m project would connect Cardiff Bay with the A48 at Tremorfa, and was first mooted as part of the 1990s regeneration of the docks area of the City, before being cancelled by then Welsh secretary John Redwood.

There is also a pledge to spend £10m on a to-be-decided transport scheme in north Wales, and an additional £5.3m for Llandrindod Wells County War Memorial Hospital.

Labour is without a majority in the Senedd, and needs a deal with another party to pass its annual budget.

Plaid Cymru withdrew from the talks this year in protest at plans to build the M4 relief road to the south of Newport.

The Liberal Democrats are also opposed, but the latest deal confirms the existing Welsh government position that construction would not start before the 2016 assembly elections.

Welsh Liberal Democrats Leader Kirsty Williams said the budget would help thousands of children

Kirsty Williams, leader of the Welsh Liberal Democrats, said: "This deal reflects a major investment into our schools, while also offering a huge boost to Wales' economy.

"The Welsh Liberal Democrats are committed to giving all children, no matter their background, a fairer start in life.

"I am delighted that we have increased the value of the grant to be £1,150 per pupil on free school meals. Nearly 70,000 pupils across Wales will benefit from this investment.

Conservative health spokesman Darren Millar AM said: "Whilst any additional cash for the NHS is to be welcomed, this investment is a far cry from the record-breaking amounts that Welsh Labour has cut from the health budget in recent years.

"It is also too little too late for those who have seen their local hospitals and services closed or downgraded in recent years."

Plaid Cymru finance spokesperson Alun Ffred Jones said the "short-sighted budget from the Welsh government delivers a vicious blow for the services that we rely on".

He added: "The UK government's determination to shrink public services is being continued by the Labour government in Wales."