There will be no phaseout date for gas boilers in the government’s warm homes plan despite its pledge to wean the UK off fossil fuels, but billions of pounds will go towards heat pumps and insulation upgrades.

Labour’s principal attempt to solve the UK’s cost of living crisis, the £15bn warm homes plan, will overhaul 5m dwellings, aiming to cut energy bills by as much as £1,000 a year, in the biggest public investment yet made into home upgrades.

Ed Miliband, the energy secretary, said he wanted every household to benefit from clean energy: “We understand that clean energy can lower bills. We are seeing record demand for solar, record demand for heat pumps. We want this opportunity to be extended to everyone in our society.”

He forecast that 1 million people would be lifted out of fuel poverty, with grants for insulation and clean energy for people on low incomes, and millions more would gain access to loans and subsidies to install heat pumps.

“This is three times more public investment than the last government,” he said. “This is what great reforming governments do – they build homes, and they upgrade homes. This is what Labour governments have done. Look at who this government stands up for – ordinary working people.”

The long-awaited £15bn plan will include five schemes in England:

£5bn for upgrades, including insulation, solar panels, batteries and heat pumps, for people on low incomes.

£2bn towards low-cost loans for people who can afford them.

£2.7bn for the boiler upgrade scheme, by which people can swap their existing gas boilers for £7,500 on a new heat pump.

£1.1bn for heat networks, which distribute heat from a central source, which could be a large heat pump or geothermal or other low-carbon source.

£2.7bn towards innovative finance through the warm homes fund, which could include schemes such as green mortgages offering a lower interest rate to homes that have been insulated and equipped with solar panels and heat pumps.

There is also £1.5bn in other funding for warm homes plan programmes and the devolved administrations in Scotland, Wales and Northern Ireland.

Simon Francis, the coordinator of the End Fuel Poverty Coalition, said the government’s plan “has the potential to be the spark that finally powers millions of households out of fuel poverty”.

A typical household investing in home upgrades under the plan could save as much as £1,000 on its annual energy bill, according to figures from the research and innovation charity Nesta. The charity found that households that get a heat pump, solar panels and a battery could reduce their yearly bill from April from about £1,670 to about £670 under the changes brought in by the plan.

Ed Miliband said everyone had the right to a warm, safe, affordable home. Photograph: Jill Mead/The Guardian

Landlords will be forced to ensure that their rental properties are energy efficient under the plan. “The last government backed off doing this,” said Miliband. “But we think people have a right to warm, safe, affordable homes.”

Official figures suggest that the number of households living in fuel poverty was on track to rise to 2.78m homes in England by 2025, despite the government’s legally binding targets to reduce fuel poverty.

Even more households – as many as 9.6m across the UK – are estimated to be living in cold, poorly insulated homes, according to a 2024 analysis of the English housing survey by the Institute of Health Equity and Friends of the Earth.

By June last year, the amount of energy debt shouldered by households had climbed to a new high of £4.43bn, an increase of 20% from the same time in 2024 and 71% since 2023, even as energy bills decreased in line with market prices.

“The lifeblood of the warm homes plan amounts to a rescue mission for the coldest, dampest homes in Britain – and this must be the priority,” Francis said. “Combined with long-overdue improvements to conditions in the private rented sector, it could save lives, cut NHS costs and permanently slash energy bills for those in fuel poverty.”

The plans are also expected to support Britain’s burgeoning industry for green home installations, which in the past have struggled owing to a lack of political clarity. The UK has recorded the slowest introduction of heat pumps in Europe in part because of low consumer confidence and high upfront costs even with the help of the government’s £7,500 boiler replacement grant.

Greg Jackson, the founder of Octopus Energy, said the warm homes plan would provide cheaper home heating. “Solar panels can slash energy costs – and paired with a battery we get the electricity when we need it. Heat pumps can be cheaper to run, and with solar they’re often dramatically cheaper. With the right finance, simpler rules and a big push from manufacturers, heat pumps will increasingly be the best solution for many homes – as they are in other countries like Sweden, Norway and Finland,” he said.

Jambu Palaniappan, the chief executive of Checkatrade, an online platform for finding tradespeople, said the plan would also represents “a significant moment for the nation’s skilled trades” to help households “take advantage of the proposals and tradespeople to seize the growth opportunity”.

But the government has not introduced a proposed ban on new gas boilers being fitted after 2035, after opposition parties attacked the idea. And instead of aiming to install 600,000 heat pumps a year, in line with expert advice, the government is targeting about 450,000 a year by 2030.

Mike Childs, head of policy at Friends of the Earth, said: “The key question is whether a ‘carrots not sticks’ approach will work. The incentives are currently too weak – we need larger grants for low-income households and investment in reducing the price of electricity. Opting for the slower route of bringing people along with them, rather than setting a legal deadline, means the government will have to squeeze emissions reductions from elsewhere, such as not allowing airport expansion.”

Ed Matthew, of the E3G thinktank, said the government needed to make heat pumps more affordable before it could bring in a boiler ban. “They need to nail the 0% loans, they need to eliminate taxes on electricity bills, and deliver high efficiency standards for all heat pump installations,” he said. “When they have done all that then households will flock to heat pumps because it’s the financially rational choice. A boiler ban would then be feasible.”