Tony Blair must prove early on in his historic third term that Labour is committed to supporting small businesses, the backbone of the UK economy, a leading business pressure group said today.

The Forum of Private Business (FPB), which represents 25,000 small-to-medium sized firms said Labour's taxation and 'family friendly' policies had angered many bosses who are becoming increasingly sceptical about Labour.

"The next five years are going to be extremely tough for small businesses if Labour decides to keep increasing national insurance contributions, the minimum wage and fuel duty,' says the FPB's chief executive Nick Goulding.

"Red tape and an extension to maternity rights are making it harder for businesses to be flexible and respond to market and consumer demand. If Labour believes in creating a business environment, as it says it does, it must reduce taxation and regulation."

Goulding said Labour must use its third term to improve skills training.

"The shortage of vocational skills relevant to the workplace is of critical concern,' he said. "Business owners are telling us that too many young people are arriving in the workplace from school, college and university who cannot spell or count to a competent level. Labour is right to focus attention on improving skills, but again the proof is in the pudding. Employers will not be patient in waiting for Labour to deliver more young people with vocation skills."

Goulding also said the FPB has made plain, in its own election manifesto, that businesses need policies that support growth, enterprise and productivity.

"The new Government needs to give control to businesses, enabling management decisions to be made quickly and easily. Furthermore, it must provide small businesses with a flexible trading structure, which can adapt relatively quickly and easily to changing business needs. These two basic principles will ensure a number of small businesses in the UK will go on to become large businesses of the future. It should not be forgotten that there are four million small to medium-sized businesses in the UK, providing more than 12 million jobs, employing 58% of private sector workers and contributing 52.4% of the UK's GDP."

FPB’s views on key business related issues:

National Insurance Contributions: The Government must look closely at the impact of increases in National Insurance Contributions and their effect on the cost of employment.

VAT: the Government must consider implementing a reduced rate for labour intensive services.

Capital Gains Tax: Needs to be reviewed downwards. Business owners often depend on the transferring of their business for their pension, the current rules lead to a depleted retirement fund for owners of small business.

Fuel Duty: The Government must abandon rises in fuel duty if small business are to remain competitive.

Business Rates: The current level of business rate impacts disproportionately on small businesses. Small Business Rates Relief thresholds should be raised so more businesses can be qualified.

Integrate National Insurance and PAYE: Administering two parallel sets of regulation increases the red tape burden; integrating the two would lead to significant savings in time and money for small businesses.

Liability Insurance: Employers' Liability Compulsory Insurance has increased by as much as 400% in some sectors. Given such increases, the imposition of Insurance Premium Tax should be either abolished or significantly reduced.

The Right to Self Employment: Making self-certification of employment status easier would alleviate many of the concerns surrounding IR35 and 19% non-corporate contributions. This would create certainty in the minds of the tax-payer and the exchequer regarding contributions.