Submitting its proposals to the government ahead of December's Autumn Statement, the organisation also insists economic growth can come from expanding the Regional Growth Fund.
Furthermore, it adds that supporting the innovation and technological developments suggested in the recent Heseltine Review will also help create small business and economic growth.
Ian Brinkley, director of The Work Foundation, said that Mr Osborne and the rest of the government must create change - even if it means slowing down the deficit reduction programme.
He added: "While there are legitimate concerns about the impact this may have on the markets, there is less likely to be an adverse reaction if the stimulus is clearly focussed on creating assets and underpinning sustainable growth."
The Forum of Private Business's own submission called on changes to be made to the National Insurance holiday to help firms expand.
Posted by Emily Smith