The policy address will kickstart a review on the structure of the lower two tiers of the representative government, the municipal councils and district boards.
The review's aim is to decide whether the existing structure could 'ensure the efficient and responsive delivery of services' to the community, according to Mr Tung, who said he had no preferences yet.
Individuals have suggested merging the two tiers so that a single body would manage district affairs.
Mr Tung said the Constitutional Affairs Bureau would look into how to take consultation forward.
He confirmed the first SAR legislature election would be held on May 24 next year and stressed the programme of democratisation set out in the Basic Law would not be changed.
'While the broad framework has been settled, there are many details that need to be worked out,' he said.
'We will be working out these details in accordance with the principles of democracy and openness required by the Basic Law and expected by the people of Hong Kong.' The Government would work towards the 'long-term objective' of having a chief executive and a legislature elected by universal suffrage, he added.