George Osborne has insisted the number of refugees Britain takes is "under review" after shocking pictures of a drowned Syrian boy triggered a backlash across Europe.
The Chancellor stressed that the UK had always accepted "genuine" asylum seekers, including 5,000 people fleeing conflict in Syria, and it would "keep on" doing so.
He was speaking as ministers came under heavy fire from across the political spectrum over their handling of the crisis.
David Cameron has insisted that taking in more people will not solve the issues, and the focus should be on bringing "peace and stability" to the war-ravaged areas they are fleeing.
Britain has opted out of EU arrangements that could have seen it allocated tens of thousands of asylum seekers being redistributed from Greece, Hungary and Italy.
But a number of Conservatives have added their voices to those demanding a shift in policy, with Mr Cameron being warned that he faces a "test of humanity" and must honour the British tradition of offering sanctuary to those in need.
Labour is urging him to convene the Government's Cobra emergency committee, gather EU leaders for a summit, and agree to a parliamentary debate on the issue.
Speaking to reporters on a visit to a Nissan factory, Mr Osborne said photographs of the three-year-old boy who died alongside his older brother and mother when a boat capsized en route to Greece were "shocking".
"I was very distressed when I saw it myself this morning, of that poor boy lying dead on the beach," he said.
"We know there is not a simple answer to this crisis, and what you need to do is first of all tackle Isis and the criminal gangs who killed that boy.
"You have got to make sure the aid keeps coming - we have put £1 billion of overseas aid in to help these desperate people.
"And of course Britain has always been a home to real asylum seekers, genuine refugees. We have taken 5,000 people from the Syrian conflict, we will go on taking people and keep it under review.
"Britain has been playing a leading role and it will continue to do so."