I work for a government funded organisation, and a large amount of our 'output' is work that I don't believe the government should have any role in providing, as it competes directly with private businesses.
Why can't the government compete with private business? Competition is good. And certainly a better use of taxpayer money than just massively funding private corporations (vide Lockheed, Boeing)
Governments doesn't have to make a profit, so they can undercut private business and distort markets. Governments should not intervene in the market except in cases of market failure (and they shouldn't be funding private corporations at all).
That depends on the market. There are valid reasons for states to get involved in business:
* some markets can never be free due to their nature (their services are not negotiable): e.g. medical care, pharmaceuticals
* some markets just create monopolies or else are horribly inefficient: e.g. metropolitan transportation, railways
* sometimes it's better that the government-funded service doesn't need to make a profit, because that way it can serve more of the government's people better: e.g. housing, education, public transport in general
* even stronger influence can be exerted on other states if you control powerful companies operating there: e.g. PRC's approach
Well I think that some of that falls generally under market 'failure', so I don't necessarily disagree. But when the market is working the government should butt out.