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Preheat oven to 400 degrees Fahrenheit and line a baking sheet with parchment paper or a silicone baking mat.
In a large mixing bowl combine unbleached all-purpose flour, baking powder and granulated sugar.
Add cold butter to the flour mixture. Using a pastry cutter or clean fingers, cut until the mixture is coarse.
In a measuring cup, whisk milk, egg and vanilla extract. Add to the dry ingredients mixing bowl with rainbow sprinkles. Gently fold with a rubber spatula until dough begins to form.
With floured hands, form the dough into a ball. If the mixture is too wet, add more flour. If it is too dry, add more milk.
Place the ball of dough onto a floured surface and shape into a round disk about 1.5 inches thick. With a sharp knife, slice 8 wedges.
Place scones on the lined baking sheet. Brush the tops with milk.
Bake in a preheated oven until lightly golden, about 20-25 minutes. Remove from the oven and let cool on a wire rack before icing.
In a small bowl, sift confectioners' sugar and whisk with milk and vanilla extract. Add a little more confectioners' sugar to thicken or more milk to thin.
When the scones have cooled spread icing and add more rainbow sprinkles on the tops.