ICLOUD

See the article https://support.apple.com/en-gb/guide/mac-help/mchl1a02d711/10.15/mac/10.15

• On your Mac, drag items from iCloud drive to another folder in the Finder sidebar or on the desktop, such as Downloads, Movies, Music and Pictures. 
• The items are copied to your Mac and removed from iCloud Drive on all your devices set up for iCloud. If you change your mind, you can drag items back to iCloud Drive.

Read these https://support.apple.com/en-in/HT204055

https://support.apple.com/en-gb/guide/system-information/sysp4ee93ca4/mac

https://support.apple.com/en-in/HT207594

Note : you have saved the precious data ( archived them ) before downgrading the storage plan also the iCloud Drive box has not been unchecked , and the files are also not deleted , neither upgraded the storage plan , yet the space is created in iCloud .

You wrote - you can safely disable "Desktop & Documents" and until you have freed enough cloud storage ( storage can be reduced ) .

There is no need to uncheck the box of desktops and documents , however the documents can be moved to some other locations .

If you uncheck the box of desktops and documents .

It will prompt the items from this desktop and the documents folder are available in iCloud Drive , to remove items from iCloud Drive , move them to your desktop and documents folder on this Mac , click on show in finder .

Again open system preferences > iCloud > iCloud Drive > the box of desktops and documents box is unchecked , tap over the box to get it rechecked , a circle rotates setting up the box gets checked .

You will notice a folder is created literally on the desktop , tap it a pop up window appears the items on this desktop on this Mac have been moved into a new folder called “ Desktops - Apples Mac book …( the name of Mac will be written in the existing desktop folder in iCloud Drive , you can combine the contents of these folders any time , click on show in finder .

Right click on the folder created on the Mac and move to trash , restart the Mac and empty the trash , but again the documents are placed in a right place in iCloud Drive as well in iCloud server .

By unchecking the box of desktops and documents - the files and documents created are invisible temporarily both in iCloud Drive and www.icloud.com but they are not deleted from the server and still occupying the space , you can check the box and use get info https://support.apple.com/en-in/guide/mac-help/mchlp1774/10.14/mac/10.14

The problem is, that you seem to have enabled "Documents & Data" for iCloud, not only iCloud Drive. Now every file you drop to your Desktop or move into your Documents folder will be stored on iCloud Drive. This is simply not feasible, if you are only using the free 5GB Storage plan. In your case it would be better to use iCloud Drive, but not sync the Desktop and Documents folder, because they can only be enabled together for iCloud.

But do not uncheck iCloud syncing, until you have freed some cloud storage. Create a new folder in your user home folder and name it "iCloudFilesRemoved" or similar. This folder needs to be at the top-level of your Home folder, outside of your Desktop or Document folder. Now drag large items from your Desktop and Documents to the new folder "iCloudFilesRemoved" to remove them from iCloud and save them locally. You will see a prompt, if you really want to remove the files from iCloud and all your devices, confirm this. Proceed with removing files from iCloud Drive, until you have freed enough cloud storage.

If you remove all files from Desktop and Documents you can safely disable "Desktop & Documents" and use only iCloud Drive to sync documents with other devices.