George Osborne has urged businesses to raise their heads “above the parapet” and counter what he sees as an anti-free market movement led by trade unions and charities.

Speaking to business leaders at the Institute of Directors’ annual convention, Osborne said principles of enterprise and business as a force for widespread prosperity were “up for grabs” for the first time in his adult life.

Osborne told the audience at London’s Royal Albert Hall: “You have to get out there and put the business argument. Because there are plenty of pressure groups, plenty of trade unions and plenty of charities and the like, that will put the counter view.

“It is, I know, a difficult decision sometimes to put your head above the parapet, but that is the only way we are going to win this argument for an enterprising, business, low-tax economy that delivers prosperity for the people and generations to come.

“There is a big argument in our country … about our future, about whether we are a country that is for business, for enterprise, for the free market.”

He added: “For the first time in my adult life that is up for grabs. That issue felt like it had been resolved when the Berlin Wall fell … Politicians like Tony Blair from the left felt like they had understood that free markets create the taxes to fund public services. That argument has gone.”

Osborne’s comments about businesses taking a stand in a battle of ideas around capitalism contrasted somewhat with a perspective from his fellow speaker, Peter Kellner, president of the pollsters YouGov.

Setting out a list of controversial business practices such as zero-hours contracts and large executive bonuses, Kellner urged business leaders to consider how their behaviour affected their reputations. He flagged up the dwindling reputations of those in power – be it in central government, local government or business.

Kellner said there had been a marked decline in recent years of trust in politics, driven by the weapons of mass destruction (WMD) revelations and later the expenses scandal. But YouGov had also noted that the reputation of business leaders had declined as a group, he said.

If they are judged by stories of “zero-hours, bad pay for cleaners, bad treatment of people in China and Bangladesh … bonuses that appear unforgiveable, tax arrangements that are not ... sociable … these play like the WMD story on reputations,” Kellner warned.

Responding to the chancellor’s comments, the TUC general secretary, Frances O’Grady, said: “The chancellor accuses unions of being anti-business, yet many of Britain’s most successful companies and sectors – such as carmakers – depend on the labour and skills of trade unionists just as much as their managers. He has let down his guard to show how much he agrees with Margaret Thatcher’s ‘enemy within’ rhetoric.

“But the real issue today is that the chancellor is doing nothing to fairly share the benefits of recovery. He has rewarded soaraway executive pay with tax cuts for the super-rich, but been happy to see the longest and deepest cut in living standards for everyone else, only this week announcing cuts in the benefits that low-paid workers desperately need when the real value of their pay is falling.”