Financial Secretary John Tsang says he has adhered to three principles - commitment to society, sustainability and pragmatism - in drawing up the Budget, to ensure the proposed measures can lay a solid foundation for Hong Kong to meet future challenges.

Helping hands: Financial Secretary John Tsang says the Government will continue to invest heavily in the community to help needy people.

Mr Tsang said although it is the Government's duty to provide the final safety net for those who cannot help themselves, it should not attempt to narrow the wealth gap by redistributing wealth through high levels of tax and welfare.

"Such a measure would only inhibit people's incentive to work hard and, in turn, undermine the productivity and competitiveness of the community as a whole.

"We will create favourable conditions, such as strengthening education and training, to help people enhance their skills. By helping people to help themselves, we will enable them to contribute to the economic development of Hong Kong."

The Government will continue to invest heavily in the community by making long-term commitments to education, retraining and healthcare, he added.

In this regard, he proposed a one-off injection of $6,000 into the Mandatory Provident Fund accounts of those earning not more than $10,000 a month; an additional $1 billion to subsidise more new medicines for patients with financial difficulties; and an additional one-month payment for CSSA and Disability Allowance recipients.

Mr Tsang singled out healthcare as the greatest challenge to the stability of long-term public finances because of an ageing population.

"Since the Government cannot increase public healthcare expenditure indefinitely, we hope that supplementary financing arrangements can be implemented that ensure the availability of adequate resources in our healthcare system to cope with the community's demand in the future, and enable us to uphold the established policy of public healthcare that no one with financial difficulties will be denied proper healthcare," he added.

He said temporary improvements in the city's fiscal position are not sufficient reasons for significant increases in recurrent spending or tax reductions.

"In studying the feasibility of increasing recurrent expenditure, we must examine carefully the sustainability of each proposed measure."

Mr Tsang said he will strive to achieve fiscal balance over the next five years, and may introduce one-off measures which will increase government spending in the short term if there are needs in the community and our finances permit.

He forecast that the measures announced in the budget would lead to a deficit in the Operating Account for 2008-09. But he predicted an operating surplus again from 2009-10, gradually building to $67.3 billion by 2012-13.

The Financial Secretary said a pragmatic approach will ensure that the resources were allocated where they were required most, and that every dollar would be well spent.

He will continue to uphold the well-established principles of prudent management of public finances by keeping expenditure within the limits of revenues, maintaining a low and simple tax regime, and by following the direction of "Market leads, government facilitates".

The Government will continue to study options on broadening the tax base. He hopes to provide opportunities for the community to discuss the tax reform options that are equitable and conform to the "ability-to-pay" principle, can generate stable revenue, offer certainty and are predictable.