TBYJ
Any more "inherently wrong" than continuing to sell your milk to Tesco at below what it costs to produce the stuff?
I don't understand how it works but I am continually told that if it weren't for the CAP food in Europe would be cheaper than it is. Which is the more logical, on the one hand subsidising farmers to produce food that nobody wants and in the process distorting the world market or on the other hand paying those same farmers unemployment benefit and/or engaging them as "countryside wardens" or some similar function?
The net result would be pretty much the same in terms of cost to the taxpayer but the latter would be more honest and more transparent and probably — in the real world — more cost-effective.
Johanna is right about the food subsidies and probably about subsidies in general. Anything that distorts the market has more downside than upside though in some instances some form of central support (I'm trying to pick my words carefully!) may be essential to ensure the continuation of an essential service that either cannot be made self-sufficient or which has no realistic value in the marketplace — government and defence come to mind as obvious examples.

Geoffchambers will not be surprised to know that I do not include coal in that latter definition! Subsidising one form of energy against another simply hampers research and development. UK railways are at least 10 years behind where they would have been were it not for the 1947 decision to continue with steam power rather than convert to diesel or electric haulage. Correction: they are on a totally different track altogether since in a properly run railway using a cleaner and more efficient fuel for traction, Beeching would never have happened, at least in the form it took.
But 20/20 hindsight is a wonderful thing!

That would seem to be about right, rhoda, but you have to remember the parlous state that the railways were in by 1947. The 1923 grouping which brought the myriad of small companies into the Big Four (Southern, GWR, LMS, LNER) was only brought about because the individual companies were going down the drain. And then there was WWII which didn't exactly help.
It's quite acceptable to argue for the nationalisation of infrastructure and there is no reason why a nationalised industry cannot be efficient and profitable. The trouble is there is no incentive to innovate. The reason why the railways in Europe are successful today (and the railways in the UK are successful as well whatever the opponents of a privatised railway might like you to believe) is not because they are publicly (or privately) owned and run but because of easyJet! Not competition for passengers but the introduction of innovative fare systems. The earlier you book (especially if you are prepared to take the gamble that if you can't travel you don't get a refund) the cheaper the fare.
If I want to travel from Dijon to London tomorrow at midday it will cost me 182€; on April 13 (and using my Senior Railcard) it will cost me 79€.
Without the incentive of a private enterprise looking for ways to improve its bottom line by doing what it does best only better (in this case moving people around Europe), we'd still be stuck in the "any colour you like as long as it's black" mentality.
Why bust a gut if government will always bail you out? And to compound the felony, nationalised industries (and, dare I say it, local government) tends to attract people who think that way. There are more of us — human nature at work — looking for a cushy number than are happy to put themselves to any inconvenience if they don't need to.

The privatisation of the railways was a classic example by the UK Civil Service as to how to **** up a perfectly logical and reasonable EU Directive.
There was never any need to privatise in the first place. All the Directive required was a separation between track and operator and a certain amount of opening up of the operation to competition. Nowhere else in Europe is there such a convoluted (and by extension, needlessly expensive) system as there is in the UK.
If privatisation was the preferred option the pre-1947 groupings could have been reformed (and would in my view have been popular with the travelling public) and the lines leased to them with BR retaining ownership of the track and signalling system. One intriguing prospect could have been the right of the operators to sub-let within their own region if anyone had a bright idea for re-opening closed lines or even starting new ones.
As it is the UK has ended up with a bureaucrat's delight, ie a total shambles from everyone else's point of view and the need to go cap in hand to the government for permission to breathe!

There are still some of us around who remember the way Rootes Group were "encouraged" to set up shop in Linwood and British Leyland were "persuaded" that Bathgate was the ideal place to make trucks.
Further comment on government interference in industry ought to be unnecessary but I suppose it's part of the human condition — it certainly always has been in the UK — that when something goes wrong in our lives then someone else should be expected to step in and sort it out for us.
I've just finished reading Martin Walker's book The Cold War and the following struck me when I read it:

In 1961 ... Khruschev promised the Soviet people that, within two decades, they would be producing more industrial goods than the USA.

By 1984 the USSR was producing more steel, more cement, more oil, more fertiliser, more pig-iron, more iron ore, more tractors and more metal-cutting lathes.

In 1961, these products embodied the the sinews of industrial power. Had the world and its technologies stood still, the Soviet Union would have been its economic giant.
My emphasis

But of course the world did not stand still. Attempts to decide what industries are to be encouraged as a replacement for industries which are dying a natural death are simply a futile effort at getting the world to stand still.
Sometimes there is an arguable case. Rolls-Royce was one such and Heath was lucky. Aero engines are not something you can pop into Tesco for and governments through defence contracts are a major customer. They can at least give a company breathing space as TBYJ says to see if something else comes along. In RR's case they got the next generation of engines right.
There was never an excuse for BL. Their product was wrong; their marketing was wrong; and the people who decided that were the customer and the banks who, in an open consumer society, are the ones who ultimately make the decision. As they have just done (to my personal chagrin) with Jessops and as they have done to Woolworths and numerous other household names.
Nobody is suggesting any of them should have been subsidised so where is the line drawn?