At this time, Doctor Who is kind of like Sesame Street; it's on publicly funded tv, but it could really sustain itself without that support.
Well, when it comes to commissioning decisions budget and ratings are two sides of the same coin; the question is (among other things) whether enough people are watching Doctor Who to justify the money spent on it.
For American shows I would agree, but there are other factors involved with British shows. Budgets are going to grow and/or shrink according a number of factors. And like the original series it might also fall out of favor for political reasons.
That's it in a nutshell. I mean, Doctor Who didn't get cancelled in 1985 just because Michael Grade and Jonathan Powell had taken over as Controller-BBC1 and Head of Drama, and both hated it (though that didn't help). The biggest cause was that the BBC was launching EastEnders, and the money for that had to come out of that year's drama department budget. Eastenders made sense financially, as once it was up-and-running it would be cheap (standing sets, contemporary clothes, cast of unknowns who can be replaced with other unknowns), delivering 52 hours of drama a year for the cost of maybe 26 (that's a made-up figure, but it's in the ballpark). But in its first year, when they had to build the Albert Square set, it'd cost 75 hours worth (again, that's a demo figure). And that had to come out of the 1985 drama department budget, meaning that the equivelent of five 'normal' series had to be dropped that year (or however many). Doctor Who wasn't the only show that was cancelled or took a gap year around then - Tenko ended (because it reached the end of the war, but that could have been held back for a fourth season), and Bergerac only ran one season between spring 84 and Christmas 86. If the BBC ever had a another big set up (like Doctor Who in 2004!), then something else would have to give, and it might be Who if it was floundering and out of fashion. As it is, I do wonder whether the costs of rebuilding the Albert Square set for HD last year contributed to the cost cuts that led to the makers of Spooks, Waking the Dead and Hustle deciding to call it a day...
Well, the need to keep overall budgets in control is hardly unique to the BBC. And the fact that Doctor Who was "floundering and out of fashion" in 1985 was reflected in its viewing figures, which were pretty appalling and had been for a while. There might still have been a hiatus even with larger audiences, but the attitude taken toward the programme by executives would have been a bit different. Ratings are, as has been noted, not nearly as important to the BBC as they are to for-profit networks, but they're still the measure of overall audience, which (along with level of audience devotion, social/educational importance of programming, and other factors) is one of the ways the BBC determines whether something is worth spending the license fee on.
Well what didn't exactly help DW's ratings was being scheduled against the likes of Cornation Street.
That didn't happen until 1987, well after the 1985 'cancellation'. The '85 season started with 9mill, had dropped to 5.5 when the cancellation became news, and came back up to almost 8 by the end of season (possibly because people thought it was 'last chance to see'), so season 22 averaged out at about 7.5 - not great, but OK, and better than seasons 21 or 18. Then the autumn 1986 season got about 4 million. The year after that it was moved to the Corry slot, where it started as badly, but tended to get better week-by-week. The last episode of season 25 topped six mill (which beats most of season 18. Or season 4).