Well, yeah, I've seen people watching FAR less TV here in the US than they would have 10 years ago. Several factors (which may or may not apply in UK):
1) Cost. Cable that went up from $35.95 to about $5 a month about 15 years ago, is up to $80 a month or so now. DirecTV costs somewhat less, and Dish network less than that (both satellite dish services) but still a good chunk of change each month. OTA (over the air), if you have good TV reception you can get "enough" channels (compared to before with analog) that many people have dropped cable or dish but since there are fewer channels to choose from, simply watch less TV.
2) Excessive advertising. One show I've seen is about 17 minutes long -- that is 13 minutes of ads. Who the hell is going to watch that many ads, that's almost 50% ads!!! I watch some TV, but NEVER live -- DVR recorded or downloads only.
3) Simply so many hours in the day. First, people do spend far longer online, so they won't be watching TV when they are online. Second, with the poor economy I've been seeing people work 2 jobs who used to work 1, putting in extra hours if they can. Going back to the cost factor, the average wage in the US is lower than it was a few years ago (not even counting inflation), so people would rather spend time online and read, if they have the free time even for that.
As for money spent on shows -- I just don't see the money spent on shows as a factor. If less money means fewer hours of programming, that is one thing. But, look, they must have spent about a buck fifty on some of those classic episodes of Doctor Who -- man the special effects were... something... -- but they were good to watch. On the flip side, I've seen movies and shows that they spent a fortune on the special effects, but the they SUCKED.
Of course, the big fad (in the US) is this endless collection of reality shows, most of which are virtually unwatchable but cost almost nothing to make. The thing is, though, good writing and good plot just don't cost a fortune, but a lot of shows now blow budget on sets and locales, and other extraneous things (there's a lot of wiggle room in special effects between "1970s Doctor Who" and "state of the art that costs a fortune" for example.)