Julian Barnes sits, knees crossed, blue shirt freshly ironed, on a sofa at London's literary bear pit, the Groucho Club. He appears ill at ease, like an officer in the sergeant's mess. His CV gives his age as 52. He doesn't look it - in the sense that, give or take a crease, he probably looked much the same when he was 32.

Incontrovertible, however, is that this man is English, as English as the pot of tea and smoked salmon sandwiches in front of him. A generation earlier and he'd have flown spitfires. A generation before that he'd have given his life at Ypres or the Somme. Today he's a man who would give you his seat in the bus without a moment's hesitation, but who would prefer not to look you in the eye.

And he doesn't. Look me in the eye that is. He motions me to sit beside him rather than across the table - "easier for me to hear you in this noise" - so we conduct the interview in polite profile. He is constantly - if wittily - on the defensive, rarely turning the eversmiling eyes, the ever-upturned mouth, towards me even for the punchline. Especially for the punchline.

The private and public Julian Barnes are as distinct and separate as the yolk and white of an egg. When the two were in danger of scrambling a few years back in a public, Brutus-esque falling-out with Martin Amis, Barnes, in the Caesar-role, appeared the loser, retreating from the high surf and deadly undertow of English fiction to the shallows of journalism and the short story. England, England marks his return to the literary mainstream.

With Flaubert's Parrot and The World In Ten And A Half Chapters, Julian Barnes gave birth to the post-modernist novel. Although England, England follows a more traditional narrative line, it shows its parentage through the juxtaposition of the public and private. Though not Barnes's own, you understand.

"My work is really very, very rarely autobiographical. There are these disparities and these opposing extremes running through the book between the public and the private, between the fake and the authentic, between the complete lie and invention and the inner truth. And what's happening in the public story is the creation of something that is completely false and what's going on in the private story is the search for some sort of inner truth about life and love. The technical difficulty of the book is actually marrying those extremes of tonality and trying to get them to work together."

The "creation of something completely false" is the creation by megalomaniac billionaire entrepreneur Sir Jack Pitman of an England theme park on the Isle Of Wight, which he buys for the purpose. The irritations of time and distance (for tourists) disappear; within a few square miles they can see Stonehenge, watch Robin Hood battling it out with the Sheriff of Nottingham (though as a sop to contemporary sensibilities, Maid Marian is a born-again feminist); spend the evening with Dr Johnson waxing cynical in the Cheshire Cheese, or shop at Harrods, conveniently sited in the Tower Of London. And then, of course, there's the royal family in a scaled-down version of Buckingham Palace.

Absurdist, perhaps. But increasingly not absurd. "I'd been working on the book for six months when an Isle of Wight councillor said they ought to become independent. And there was a big row about that and I thought `damn, I wish he'd said it after the book had come out. People will think I took it from him'.

"I've taken some liberties, but if you think that there is a Las Vegas hotel chain planning to recreate the centre of Venice, the Doge's Palace, the Campanile, it's completely logical: over 90 per cent of Americans don't have passports. If you consider also that there is a plan announced in the current issue of the Art Newspaper, that an Italian consortium is going to rebuild ancient Rome called `Roma Vetus' (Old Rome) in 100 acres outside Orvieto where everything will be in much better shape and you can see it all much more easily. And they're going to have chariot races and it's going to be lit by torches."

At the time Barnes first had the idea, the reality of such things actually happening was not the issue. "I suppose you could say I am interested in what you might call the invention of tradition. Getting its history wrong is part of becoming a nation. And we do the same thing with our own lives. We invent, ransack and reorder our childhood. You don't have to be a writer. Any citizen of the country is interested in the image of his or her country and in the way it's presented both externally and internally. Take Tony Blair's modern, exciting New Britain. At the same time we're an ageing nation, failing in its powers and selling ourselves to people who come to this country on the British bobby, not on the Dome."

But he says his attack (and for all the book's hilarity, attack it most certainly is) is not fired by nostalgia for the past. The picture he paints of a moribund Anglia (as old England renames itself when the Isle of Wight becomes the new de facto England) is far from cheery, being Barnes's take on "what would happen if a modern industrialised nation fell out of the loop and had to start again".

Nor, he says, is the invention of tradition, he says, limited to the heritage industry. We talk at length about Blind Date, how its phoniness is now an integral part of its success. ("It becomes a sort of reality. That's how they met. But where's the authenticity in their dating?") Then there's sport. "In the old days, when you went to a football match or a cricket match there was, built up over many many years of the same people going to the same matches, what you would call `authentic conduct'. Now, some of it might have been abusing the referee and calling the opposition players bastards. But it was authentic conduct. What you get now is attempts to incite the crowd to react in a particular way. It may be that what's being orchestrated is a version of what was there originally. But at the same time I find there something sinister about it not being spontaneous. Why can't the crowd decide when it wants to cheer itself?"

Barnes has ensured that the megalomaniac behind England, England is not just a buffoon. "I want him also to be frightening. I take the equivalent figures in our society and transnationally very seriously. Figures like Murdoch and Maxwell. You have to understand them to understand how the structure of economics and, to a certain extent, our politics, works. The Labour Party is running scared of Rupert Murdoch who doesn't even live here, isn't a British citizen and pays almost no taxes here at all. So you have to know what Murdoch wants and what his agenda is, and to think what the British government is fitting in with."

Barnes says he does not write to solve problems. "It would be absurd, incredibly vain, to think you could somehow solve such problems either in a literary way or in a personal way by writing about them. But you write to tell stories and you write about themes that itch you. I don't think I'll stop itching. In this book it's myth, it's history, it's love, truth, integrity, stuff like that. And those have a lot of itch miles left."

England, England is published by Cape. Julian Barnes reads from it on Thursday at Waterstones, Dublin, at 6.30 p.m.