It means not running public services on the cheap, with contracts given to whichever private or 3rd sector organisation that offers the lowest bid. Bids low for a reason. Run on a shoestring with poor quality service, poorly trained and demotivated staff (no wonder often high staff turnovers), where more time and money is spent on winning and keeping contract than providing a good service.
It's a false economy because it's everything is interlinked in society. Delayed or poor healthcare, unaffordable or substandard housing, poverty. All interrelated. Lack of social housing, delayed or poor NHS care, limited job education and training opportunities, weak child support system, and other poor quality or inaccessible public services leads to a higher benefits bill.
Timely and effective help and care, more social housing, an improved child support system, and job education and training opportunities cost upfront but pays off later on, as it reduces the need for benefits, reduces demand on the NHS, reduces need for social care, and reduces crime.
Examples of the consequences of false economy often seen on MN threads.
Someone gets fobbed off by GPs and or has delayed healthcare due to long waits. So they get more unwell and less able to work. So need benefits and for longer period of time.
A recent thread had a woman fleeing DV. Because of lack of social housing she was going to have to give up her job (and therefore need benefits) to go to a refuge.
Other threads on here about lone parents where the other parent is weaseling out of paying child support (including high earners) and the CMS system not being as effective as it could. So the RP needs benefits.
People in full-time work but needing benefits because of the lack of social housing.
These are just some examples but that's what I mean by false economy.