Take this through to its logical conclusion and you have the government owning farms, making food, making its own steel, building its own cars, etc. with a corresponding loss of revenue-raising activity in the real economy.
In a bubble, there is no revenue raising difference between a government owned economy and a private economy with equal production.
Realistic differences come down to comparative disfunction of management (IMO, best considered in terms of which is worse).
Government services help everyone and raise the floor of the standard of living. Someone is now free to go write and do SOMETHING else and sell that.
By your logic, we should get rid of libraries since more economic activity would happen if everyone had to buy their own books.
That may be true of local/state governments, but it isn't true for currency-issuing governments like the US. I'm not as familiar with the EU monetary system as I haven't read as much into it.
They've started complaining, especially since prices have been going up, but while there's rumbling underground, we've yet to see any real movement away from Microsoft.