Government initiatives to encourage small businesses to use more fuel-efficient company cars will be overshadowed by the burden of additional transport taxes, the Forum of Private Business (FPB) has warned.

The rate of VAT on fuel increased by 2p a litre in October last year and while another 2p rise in April 2008 was delayed in the Budget, this was only put off until October.

The Chancellor Alistair Darling also revealed in the Budget that he would be inviting tenders for road-pricing technologies and that the government would continue to fund local congestion charge schemes.

"The possibility of road pricing combined with an increase in fuel duty has left smaller businesses genuinely worried that they will struggle to control costs," said the FPB's chief executive Phil Orford.

"Many of our members are concerned that delivery and supply costs will rise sharply. Given the evidence that other input costs are also on the rise, many will have no option but to increase their prices in order to remain profitable."

Darling also announced that the capital allowance for business owners buying new cars with low CO2 emissions - which allows them to write off 100% of the purchase price of a vehicle - would be extended to five years.