"We were a team at the time and we realised we were in difficult circumstances, where a tough decision had to be made," she said, referring to the controversial handout by Finance Secretary John Tsang Chun-wah.

When questioned as to whether she agreed with it at the time, she would not say.

Lam said when she was director of the social welfare department, she felt short-term relief measures were not a good idea.

"It [the social welfare provided] has to be sustainable. There is no point helping some people, when the next day, or when the next family comes into your office, you are not able to help them," she said.

"Let's face reality. To ensure Hong Kong remains competitive, we have to uphold a very low tax regime. So there is a restriction in fiscal terms in how much we can spend."

On the issue of poverty, Lam said having more than one million people living under the poverty line was "hardly acceptable in Hong Kong", especially because more than 200,000 of them were children.

She said setting a poverty line showed the government's determination in tackling the problem and she believed the poverty rate and poverty gap could be reduced in coming years.

"By 2017, I am pretty optimistic that we will see a lower figure [on poverty]," she said.

Lam refused to comment on whether the former administration, under chief executive Donald Tsang Yam-kuen, failed to tackle poverty in the city.

She also dismissed the suggestion that she would be "Beijing's plan B" to replace Chief Executive Leung Chun-ying.

"I cannot see why I would not finish this term as the chief secretary," she said, stressing that she would "most definitely" not serve the term as the chief executive.