Because the funding source doesn't have a clue nor would it have any interest in spending the money efficiently or effectively. Just because there are more zeroes on the check doesn't mean that more science is being done.
I understand that the private sector can be more efficient for certain things, but these are not gifts nor scholarships. I have applied for EU finding and I can tell you that there is a lot of work that goes into proving that they got their money's worth. You have progress reports to do, intermediate results to publish and paperwork to fill in order to keep the funding. Getting the money without doing any research (=stealing) is not that easy and, in my limited experience, does not occur that often.
How about useful research? Government funding isn't so extremely important, when you want research that actually pays for itself within a few centuries.
That's a philosophical viewpoint that, in my opinion, produces short-sighted research of the kind that will give you incremental iPhone updates but no major breakthrough. I cannot convince you of the validity of this claim, but true science is a high-risk and long-term endeavor of the kind that does not appear favorably in quarterly financial statements. The private sector revolves around the next yearly bonus, not about a project that can pay off 10 or 20 years later. Also, don't forget that private "research" is locked under patents and any useful results do not necessarily benefit the society as a whole (at least for 10+ years). So, even if you assume that research by private organisations compares favorably, it is not truly equivalent.
I don't see why it's so hard to see that. "Hard and competitive" doesn't mean anything of value happens. All those people striving for easy money when they could be doing something productive for society?
How about you try to get that "easy" money. Have a look at the requirements for application in the Horizon 2020 EU research program. You need several AAA laboratories (ideally, with multiple Nature/Cell/Science publications) in order to stand a chance. Now, if you feel that basic research is not "productive", I'm probably wasting my time. At least consider the possibility that big research projects produce side effects that are beneficial but difficult to measure (say, WWW was invented initially for use in CERN).