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Well according to the estimates given in the article the opposite is true and digitisation would save 4.5m£ p.a. Archival of paper has its own costs after all. You need climate controlled environments, regular review of the documents to make sure they aren't damaged by organics or anything, and physical storage space.
So not only is this argument probably wrong, engaging with it also gives credence the people suggesting that saving a paltry 4.5 million £ a year (which is about 0.06 £ per capita) is worth the downsides of this move, which it isn't according to all the experts cited in the article. The focus should be on the lost information, not on the costs.
Hell, at those costs you could just store them both physically and digitally without much difference in the overall budget (except for the initial digitisation of the physical documents). Digital storage is very cheap even with redundancies, and integrity checking can be automated.
Somehow I read it completely wrong, as they are saying the cost would be 4.5m and that sounded too cheap, this is why I was skeptical about their costs estimations. But yeah, I agree with you in every point.