Labour plans to require firms hiring skilled foreign labour to also provide local apprenticeships were challenged when business rejected the idea, and the party conceded that the apprenticeships would have to be offered to all EU workers, not just British youngsters.

In one of its big policy announcements of the conference, Labour said large firms would have to train an apprentice if they wished to hire a skilled worker from outside the EU. But the British Chambers of Commerce and CBI condemned the proposals as adding more red tape. Some Labour frontbench members were shocked that greater effort had not been made to convince business leaders in advance.

Some Labour figures involved in framing the apprenticeship policy did not appear to have been consulted.

The advance publicity in the weekend press suggested "a Brit job for each foreign worker hired". Miliband was himself quoted as saying: "Any firm that wants to bring in a foreign worker from outside the EU will also have to train up someone who is a local worker." But Labour internal briefings had made clear that the apprenticeships would have to be available to anyone in the EU.

The policy has been in preparation for months and the party said it would be included in a Labour government's immigration bill in the first term of parliament.

The Tory business minister Matthew Hancock said the scheme was unravelling and illegal. To be compliant with European rules on free movement of labour, the Tories said, Miliband's policy would have to require companies to take on an EU national apprentice, rather than a UK national, for every non-EU worker hired.

But Labour's immigration spokesman, Chris Bryant, said Hancock was wrong to suggest the apprenticeship policy would be unlawful and suggested that the posts would be available to anyone from the European Economic Area (EEA) – the EU, Iceland, Liechtenstein and Norway – but in practice were likely to go to UK applicants.

In response to a jibe on Twitter from Hancock, Bryant tweeted: "New apprenticeships exactly as now [will be] open to all EEA but in practice 99% go to local workers."

Labour argued that the number of Germans or Bulgarians who would take up the offer of a UK apprenticeship was minimal.

John Longworth, director general of the British Chambers of Commerce, condemned the scheme as an "apprentice tax" on employers and on job creation. "It serves neither to control immigration, where we should have a points system linked more strongly to economic benefit, nor young people, who should be encouraged and properly supported rather than being used to control immigration by other means.

"Businesses need to be able to choose the talents and resource they need, and sometimes cannot find in the UK. This immigration benefits Britain. Penalising good companies by making the grant of a work permit conditional on taking on a UK apprentice just raises business costs and new red tape.

"There are far better ways to support employers to take on and train our young people. Let's talk about the need for work skills in our schools, and incentives for companies taking on apprentices. And let's talk about a proper points-based system to control levels of migration while ensuring we get the top-level skills we need to be competitive."

The Institute of Directors said the scheme was divorced from reality.

Miliband has highlighted a series of policies designed to provide greater security for workers, including action on zero-hours contracts, and an increase in the maximum fine from £5,000 to £50,000 for paying below the minimum wage, as well as new powers for councils to enforce the minimum wage. No company was prosecuted for under-paying the minimum wage between 1998 and 2007, and the shadow home secretary said there had to be more prosecutions.

Labour has also set up a review to look into how the minimum wage can regain its lost value, but put no figure on the necessary rise, or any timetable. Similar proposals were announced by Vince Cable, the business secretary, last week.

Labour also came under attack over its proposals for parents of primary-school children to be guaranteed 8am to 6pm "wraparound childcare". The shadow Treasury secretary, Rachel Reeves, said no new money would be available to underpin the scheme.

In his interview on the BBC's Andrew Marr programme Miliband ruled out an early commitment to hold an in-out referendum on British membership of the EU, but left open the possibility of changing his stance before the election. "We set out a very, very clear position on this but we will set out our position at the election," he said.

He also pledged to stop building any more free schools and to prevent existing ones from expanding. But he said he would not close "good schools".

In a conference given over to highlighting falling living standards, Miliband is announcing fresh plans to clamp down on profiteering energy companies and a major housebuilding programme.

He argued something fundamental had changed in the UK labour market, saying: "For generations in this country when the economy grew the majority of people got better off. Now that vital link between the growing wealth of the country and people's family finances has been broken. The question is for the British people: is there a party that is going to tackle that?"