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The government body aiding Britain's small businesses in Whitehall has struggled to clarify its remit and boost its effectiveness, a report from the public accounts committee (PAC) has said.

Published today, the PAC report examines the Department of Trade and Industry's (DTI) decision to remove the executive agency status of its Small Business Service (SBS) organisation in October last year.

But it criticises the SBS for its failure to tackle the "inherently complex" challenges faced by helping small businesses across 15 government departments. Limited influence and "a number of shortcomings" related to its involvement with government regulation have undermined the body, the report claims.

"The new, slimmed down unit must now do what its predecessor never managed: justify its existence," PAC chairman Edward Leigh said.

"Britain's small businesses are too important for our economy for them to waste time and money trying to understand where to get support and attempting to cut a way through the present forest of regulation."

Conservative shadow small business minister Mark Prisk said that the report showed that "ministers are in a muddle".

"They have no idea how many business support schemes they're funding, or what the true cost of red tape is for small business. Without this basic information, any so-called 'simplification' of the SBS or its schemes will be meaningless," he said.

A DTI spokeswoman noted that the report welcomed the government's decision to downsize the SBS into a smaller policy unit. She added that the government was at the forefront of efforts to help small businesses in the UK.