Lawmakers have given the Financial Secretary's 2006-07 Budget the nod of approval after passing the Appropriation Bill in the Legislative Council in a vote of 50-4, with one abstention.

In a speech to the legislators today, Financial Secretary Henry Tang recognised his proposed budget had generated "considerable debate in the community".

"Our strong economic recovery and the improvement in the Government's financial position had heightened the expectations of some. I can therefore understand their wishes for concessions in taxes and increases in welfare. Although views are divergent, I am happy to note the findings of various independent surveys: the majority of respondents have endorsed my principle of fiscal prudence," he said.

He recounted Premier Wen Jiabao's remarks in announcing the outline of the 11th Five-Year Plan at the National People's Congress in early March this year, when he referred to Hong Kong's position in the overall framework for national development.

"From the perspective of long-term national economic and social development planning, he stressed the importance of maintaining the prosperity and stability of Hong Kong, upholding the principles of 'One Country, Two Systems' and 'Hong Kong People Ruling Hong Kong', supporting the development of our financial, logistics, tourism and information services, and maintaining Hong Kong's position as an international financial, trading and shipping centre," Mr Tang said.

HK, Mainland must work together

He acknowledged Hong Kong's gratitude for the Central Government's support, and stated his long-term vision for the city: "Hong Kong should, by our working together, contribute to our nation, capitalise on our strengths and develop into a just, caring and vibrant cosmopolitan city."

Three policies outlined in his budget will have a long-term effect on Hong Kong's future economic viability:

* prudent management of public finances;

* expanding Renminbi business; and

* pooling of talent.

"The policies adopted in our overall plans should be mutually beneficial to the Mainland. We must adhere to the 'three Cs' principle, namely, Complementarity, Co-operation and friendly Competition with the Mainland," he said.

"We must provide the Mainland with an international standard of efficient, diversified and multi-currency instruments and financial services. This will help open up more fund-raising and investment channels for the Mainland and further consolidate our position as an international financial centre, thereby achieving a win-win situation."

One of the important strategies for financial development in future, he said, is to strengthen our role as the launchpad for Mainland enterprises to invest and raise capital in international markets, complementing the Mainland's financial reform and economic development.

"While the Mainland is making an all-out effort to build a moderately prosperous society in all respects and developing a socialist market economy, we will continue to adhere to the principles of a market economy and remain a capitalist society," he said.

"Maintaining a small government. Spending within our means. Sharing wealth where we can. Investing in the future. These are all aspects of fiscal prudence and also the pledges that I am striving to fulfil. Prudent fiscal management serves a number of purposes by keeping our taxes low and simple, providing a basic safety net and saving up for a rainy day. This is the approach that best satisfies the community's public-finance aspirations.

"I firmly believe that my Budget has struck the right balance. With our low taxation, we need to maintain a small government and a low level of expenditure. We need to be alert to the many challenges Hong Kong faces, and save up for any rainy days that lie ahead.

"I have responded to the community's aspirations with due regard to our fiscal position. I have taken a principled approach by sharing wealth - to the extent that we can afford this - with the people. I will continue to invest in infrastructure in order to lay a solid foundation for the sustainable development of Hong Kong.

"I am planning to strengthen our public finances in the long-term interests of our society. And I am heartened by the views expressed by various sectors of the community and their support for this year's Budget. Apart from making ourselves a just, caring and vibrant special administrative region, we should make an important contribution to the building and development of our nation.

"I firmly believe that, for as long as we remain united and continue to work together, we shall be able to make the best of the opportunities in front of us and that Hong Kong will emerge as a better and stronger international city," he concluded.