The Archbishop of Canterbury has slammed the tone of the EU referendum campaign as "unacceptable" and warned the UK's politics was in danger of stoking division.

Justin Welby spoke in a House of Lords debate on the referendum and criticised the "poison and hatred" that emerged as a result of the debate. He urged political leaders to tackle the "xenophobia and racism" seen since the UK's vote to leave the European Union.

He said both sides had "veered over the line". Speaking to peers on Tuesday afternoon he said: "Through those comments cracks were created in the thin crust of the politeness and tolerance of our society, through which since the referendum we have seen an outwelling of poison and hatred that I cannot remember in this country for very many years.

"It is essential not only in this House but for the leaders of both sides and throughout our society to challenge the attacks, the xenophobia and the racism that seem to have felt to have been acceptable – at least for a while."

Since the referendum result a surge in the number of hate crimes against immigrant communities has been reported. According to Tell Mama there was a 326 per cent increase in the number of anti-Muslim attacks. 

Welby took the opportunity to criticise Tory leadership candidate Theresa May and spoke of the "unacceptability of treating people as bargaining chips". May has said it is uncertain whether or not EU migrants would be allowed to stay in the UK. 

He quoted Galatians 5 in the Bible and warned; "cease to tear one another apart, lest you be consumed by one another." He told peers: "We are in danger of that in the way our politics is developing at the moment."

He said there was a desperate need to "tackle the issues of inequality" in the UK. "It is inequality that thins out the crust of our society. It is inequality that raises the levels of anger, resentment and bitterness." He said such was the "widening of the unfairness of our society" that "it is no surprise that some of the things that has so shocked us have emerged".

Welby urged the government to take up "the tools to tackle inequality" and said investment was needed across education, health and housing. "This is not new," he said. "We have done this before."

But he went on to say that investment without a renewal of our values would be useless.

"If those tools [to tackle inequality] are to be used effectively, they are no use held in some kind of vacuum of values. We need a deep renewal of our values in this country. We need a renewal of a commitment to the common good."

The Archbishop finished by saying he planned to host a debate on the "nature of British values" in September.