"I do ask for funded courses to NOT have an obvious lack of practical application."
Yes, but why? You've already conceded that some subjects have no obvious practical application yet you still want funded courses to have some kind of practical application (and don't dare get all hair-splitty about something 'not lacking a practical application' not being the same as having a practical application: Not lacking something is quite definitely the same as having it).
You cite literature and theology as courses which only qualify you to study literature and theology but this is simply not true. For one thing I gained entrance to university to study philosophy via a half-complete theology degree (and now I work quite comfortably in IT), and for another we might as well argue that pure mathematics only qualifies you to study pure mathematics.
On the contrary - degrees furnish you with tools for thinking: Those tools can have applications which are tangential upon the original reason for being given that tool.
> Yes, many artists do study arts-based subjects at uni, but in most cases it won't make them better artists.
Really? Define 'better' in the context of art.
Also - you say that 'many artists ...' assertion: How many artists, exactly?
"It's indisputable that the majority of arts graduates won't end up working professionally in the area they studied - the numbers on this just don't lie."
So what if you don't end up working professionally in the area you studied for? Does this mean all your studying was wasted? Would you argue the same if a child spend a great deal of time learning to write: "Well you're never going to be a writer, so if I were you I'd give up now"? What are you: "Master of consequences" or something?
"You don't get to study at RCM unless you already have a proven talent for music"
True, but for one thing there are other places you can study music besides the RCM (this even includes some universities), and for another musical education isn't much different from non-musical education. Try getting in to do a maths degree without having a "proven talent for maths".
"And don't get the impression that I think all technical/vocational subjects are worth funding - there are plenty which are pointlessly oversubscribed." Forensic Science famously has full courses everywhere, when the police actually require single-digit numbers of graduates. Music Technology courses are also full, and similarly need single-digit numbers of graduates running sound for touring bands and working in the few remaining pro studios."
Universities don't exist simply to churn out employees - they exist to allow people to study their chosen subject. This means that oversubscription relative to the job-market is an irrelevance from the point of view of a university because the onus for 'getting a job' falls on the person doing the studying. Even if you were to restrict funding to courses which were perfectly in-step with the job market (and good luck with that, btw) this still wouldn't guarantee that graduates would necessarily want a job in the same area they studied.
I appreciate your point about lots of graduates being out of work and this being a bad thing, but lots of non-graduates are out of work as well and an employer's attitude that they must have a graduate is just as much to blame as universities allowing students to study courses that don't have immediate practical application. Most employers don't need graduates - they just need someone with a brain, who is willing to learn, and doesn't mind sticking around for long enough to acquire the kinds of skills the job requires. Moaning at universities for not churning out the 'right kinds' of graduates is simply bollocks - if a business really requires a graduate why don't they pay for someone who already works for them to go to university on day-release they way they used to?