Prime Minister David Cameron and other British politicians have condemned Trump's call for all Muslims to be barred from entering the US in the wake of violence by Islamic extremists.
Some Britons say the remarks amount to hate speech and have called for Trump to be barred from the UK, where he owns a Scottish golf course. An online petition has surpassed the 100,000-signature threshold that means a committee of lawmakers must consider it for debate in Parliament.
Answering questions in the House of Commons, Osborne said "the best way to confront the views of someone like Donald Trump is to engage in a robust democratic argument with him about why he is profoundly wrong."
The government has the power to bar people considered a threat to public safety or national security, or those with criminal convictions. In the past the UK has denied entry to figures as diverse as boxer Mike Tyson, rapper Tyler the Creator, radical Muslim preachers and the late Christian fundamentalist Fred Phelps Sr.