Theresa May has defended her stance on refugee children despite Justin Welby's criticism
The Most Rev Justin Welby was "saddened and shocked" by ministers capping the scheme at a maximum of 350 unaccompanied youngsters.
But the Prime Minister insisted the limit was "absolutely right" for the country.
The angry row erupted yesterday when Home Secretary Amber Rudd confirmed the decision to set a maximum on the number of unaccompanied children allowed into the UK under the scheme. She feared the scheme to help youngsters fleeing war-torn Syria – introduced in response to pressure from Labour peer Lord Dubs – could be abused by people trafficking gangs intent on smuggling illegal migrants into Britain.
Refugees, like all people, are treasured human beings made in the image of God
Justin Welby, Archbishop of Canterbury
Mrs May later defended the Government's approach, saying: "We have been seeing quite a number of children and families being resettled here in the United Kingdom.
"I think what we are doing in terms of refugees is absolutely right, on top of course of the significant financial support and humanitarian aid we are giving to refugees in the region of Syria – a commitment of £2.3 billion, the second biggest bilateral donor."
Mrs May spoke out in defence of the Government approach after the Archbishop released a statement criticising the move.
Dr Welby said: "I was saddened and shocked.
"Our country has a great history of welcoming those in need, particularly the most vulnerable, such as unaccompanied children.
"Refugees, like all people, are treasured human beings made in the image of God who deserve safety, freedom and the opportunity to flourish."
Dr Welby also cited a quote from Jesus in the Bible saying: "Truly I tell you, whatever you did for one of the least of these brothers and sisters of mine, you did for me."
He said he had expected around 3,000 unaccompanied children to be allowed into Britain as a result of the so-called 'Dubs Amendment' to immigration legislation, which set up the scheme.
Most Rev Welby said he was shocked and saddened by the decision
The Archbishop added: "To end the scheme now, when such a small proportion have actually entered the country, is regrettable.
"Local authorities, who are bearing the costs of the resettlement, must be given the resources and time needed to meet our original commitment."
He concluded: "We must resist and turn back the worrying trends we are seeing around the world, towards seeing the movement of desperate people as more of a threat to identity and security than an opportunity to do our duty.
"We cannot withdraw from our long and proud history of helping the most vulnerable.
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"I very much hope that the Government will reconsider this decision, and work with church groups and others to find a sustainable and compassionate solution that allows those most in need to find sanctuary in our country."
Confirming the limit in the Commons earlier, Ms Rudd claimed the Dubs Amendment was encouraging youngsters to head to Europe from the Middle East and leaving them vulnerable to people traffickers.
"It acts as a pull. It encourages the people traffickers," the Home Secretary said.
"The Government have always been clear that we do not want to incentivise perilous journeys to Europe, particularly by the most vulnerable children."
Amber Rudd said maximum will be set on the number of unaccompanied children allowed into the UK
"We have done what we were obliged to do, and we have correctly put a number on it."
Mrs Rudd insisted that the child refugee scheme was not "closed" permanently.
She added that the decision to put a limit on the numbers followed talks with local authorities providing accommodation for refugees about their capacity for looking after unaccompanied minors.
"We are grateful for the way in which local authorities have stepped up to provide places for those arriving, and we will continue to work closely to address capacity needs," the Home Secretary said.
Labour MP Yvette Cooper said the decision to impose the limit was "shameful".
Most Rev Welby had expected around 3,000 unaccompanied children to be allowed into Britain
And she compared the refugee scheme to the "Kindertransport" evacuation of Jewish child refugees from the Nazis during the 1930s.
She said: "This was an important way for Britain to do its bit in a global refugee crisis just as we did through the Kindertransport generations ago.
"It is shameful that the Government has stopped it so soon."
Tory backbencher Peter Bone said Ms Cooper's demand for the limit to be scrapped was "absolutely wrong".
He said: "If we continue to take unaccompanied children into this country, more and more will be taken from Syria and across the dreadful sea routes, with many dying, and we will be feeding and encouraging human trafficking.
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Heathrow Lodge in Longford
"I urge the Home Secretary to continue to take people from Syria, but to abandon taking them from Europe, which encourages human trafficking."
And a Tory MP with Jewish ancestry described Ms Cooper's reference to the Kindertransport as "distasteful".
Mr Farbricant said: "Like Lord Dubs, I share Jewish extraction ancestry.
"May I just say how distasteful I find it when I hear some commentators compare the situation today with that in the 1930s and the Kindertransport.
"In those days there was no opportunity to go into Germany or the axis countries and assist those children who faced death in concentration camps.
"In this situation it is very different.
"I simply ask, will she condemn those commentators – thankfully no one, so far, in this House – who do compare the situation in the 30s with today?"
Ms Rudd agreed, saying: "He makes a very good point. It's not the same.
"Perhaps the one comparison one might make is the conditions sometimes of the camps out in the region.
"There, where there are some terrible situations – there is a terrible situation in some of the camps – is where we should put all our effort, to make sure that we take the children that we can from that most vulnerable area."