It is hard to believe that Bernard MacLaverty has not lived in his native Belfast for more than 20 years. As you walk with him through the eerie, ceasefire-calmed streets, dropping into pubs or looking at paintings in the recently opened Ormeau Baths Gallery, he seems to be forever encountering old friends. They gently chastise his perceived indolence (Grace Notes, tipped as a favourite for the 1997 Booker Prize shortlist, announced on Monday, is his first novel for 14 years), while swapping anecdotes about their shared Catholic boyhood. He seems so at ease in the city, so at home in the pubs and bars, that you wonder why he ever left. The answer, of course, is everywhere apparent.

The marching season is entering its long twilight, but the Union flags, tied to street lamps, draped from bedroom windows, crack provocatively in the breeze. Elsewhere, the green, white and gold Republican tricolour is hoisted above estates, marking out territory. In Cal, the book that brought him to international attention in 1983, the unhappy boy-hero observes that if the Union flags were flying long after July 12, then it was a dangerous sign that “the Loyalists were getting angry”. In Grace Notes, a young unmarried mother and composer called Catherine McKenna returns to Belfast for her father’s funeral after a guilty absence of five years, and finds that an IRA bomb has blown the heart out of her village. Repeatedly, a melancholy politics comes seething to the surface in MacLaverty’s work.

In Lamb, his exceptionally well-received 1980 debut, a priest is tortured by his love for a vulnerable boy, whom the man destroys rather than confront with his homoerotic obsession. Made into a film in 1985, featuring Liam Neeson as the priest, the book was a canny parable of a violent Republicanism that, says MacLaverty, “claims to love Ireland, but because it’s a misdirected love ends up destroying what it most loves”.

This vein of pessimism runs through all his work, rendering happy endings an impossibility. Even in the story of Cal, so full of tenderness, the end is appalling as Cal, defeated by his hopeless love for the woman whose Protestant husband he helped murder, is arrested by police, “grateful that at last someone was going to beat him to within an inch of his life”. Cal, the first of his novels to be turned into a film, starred the young John Lynch in the title role.

MacLaverty, 55, who now lives in Glasgow, says: “I get angry when people say my work is set against the Troubles, because it grows directly out of them. If I wrote a happy ending it would mean that the problems were solved; but it would be a skilfull politician that negotiated compromise in a situation where none can exist.”

Still, Grace Notes, written during the ceasefire that ended with the bombing on the Isle of Dogs in 1995, is his least pessimistic book. It is also that rare thing, a successful contemporary novel about classical music. The untranslatability of music means that it is almost impossible to render convincingly into words without collapsing into abstraction. The “meaning” of music, MacLaverty suggests, lies on the other side of languague; it does not represent anything in the empirical world, but carries you wordlessly beyond it. It is the voice of the metaphysical will.

Catherine understands this, and her struggles to compose music, while grappling with postnatal depression, a violent boyfriend and a rift with her parents, are a metaphor for the wider struggles of creativity. MacLaverty claims to work, slowly and his literature abounds with motifs of artistic paralysis: one of his short stories features a blind painter; another, a talented calligrapher who works despite having a crippled hand. In Grace Notes, Catherine likens herself to “the silent composer, the blind painter and dried up writer”.

“Losing that gift to create is a terrible thing,” MacLaverty says. “It feels a bit like receiving a camera as a present but having nothing to photograph. When you find yourself in this position you examine your own humanity, your problems and what drives you to anger. After this, things can loosen up a bit.”

MacLaverty left Belfast with his wife Madeleine, a civil servant, and their four children in 1974, moving to Edinburgh shortly after he qualified as an English teacher. “The Troubles were behind my going. Belfast was a frightening place in the early 1970s: bombs going off, doorstep murders and Catholics being picked up by Loyalist death squads. Once I qualified as a teacher I knew I could work anywhere; a job keeps you in a place. So I applied for jobs in Scotland and the north of England, ending up in Edinburgh, which appealed because of the festival.”

Arriving in Scotland, he already had a collection of stories - Secrets, issued by a small Belfast press, Blackstaff - but he felt that, “if I was ever to reach a wider audience I had to have a novel”. So he borrowed a beginner’s guide to writing fiction from a mobile library and began work on Lamb. This seems an astounding admission: but he insists he had little formal education and was “something of a dunce” at St Milligan’s, the Catholic grammar school he left at 18 to work as a laboratory technician at Queen’s University.

After the success of Lamb, he gave up teaching. “I have never regretted it, though those days when the words don’t come it can be an agony.” As an adolescent he had no wish to read or write, preferring to play football and, bewilderingly considering his roots in Catholic Belfast, cricket. He became interested in literature in his early twenties after being given a copy of The Brothers Karamazov - the text that, coincidentally, inspired Arthur Miller to become a writer. MacLaverty says: “This wonderful, strange book opened my eyes to a new world; it took me ages to read - I was at the stage where I still moved my lips - yet I was utterly transformed by it. In a small way, it led me to believe that I could be a writer, too.”

Though his memories of school are mostly bad, he has few regrets about his disrupted, inadequate education. “My school was okay, but it was of its time. Its purpose was to get boys into the civil service or the priesthood. The teaching staff was full of freaks and sadists; weird things happened, like being taught to memorise, in a Catholic school in Ireland, Milton’s sonnet, Cromwell our chief of men.”

MacLaverty looks up from his drink, his face crumpling into laughter. Despite the sombreness of his books, he is intensely animated, cheerful. Many of his sentences end on a note of incredulous laughter. He finds the dilemmas of contemporary Ulster blackly absurd, approvingly reciting the adage, “If you are not confused, then you don’t fully understand the situation”.

We are now in the Crown bar in central Belfast, and MacLaverty works the room impressively, telling jokes and translating the idiomatic speech of the girl who brings us drinks. With its gas lighting and preserved Victorian interior, the Crown provides the ornate setting for a scene of hilarious drunkenness in Grace Notes.

As a writer, MacLaverty is drawn to the local, to the vernacular; he is suspicious of the deadening tug of literary English, what he calls “Oxford English”, admiring writers such as James Kelman who speak authentically in their own voice. His favoured form is the short story and he shares with the masters of the medium, such as Chekhov and V.S. Pritchett, the conviction that the thoughts of so-called ordinary people have their mystical and poetical edges, and it remains “your highest duty as a writer” to brush up against those edges.

One of the best passages in Grace Notes concerns Catherine’s encounter with the dead body of her father. With exquisite precision, MacLaverty describes the old man’s face, his cavernous nostrils, blue-black lips and nose that “looked more hooked” in death. His own father, a commercial artist from whom he inherited his love of music, died when he was 12, casting a long shadow across his adolescence. Absent parents, disrupted families and unsettled children are recurring themes in his work. “The big blight,” he once said, “was that my father didn’t live long enough for me to talk to him except as a wee boy. I never had a conversation with him man to man.”

Before we part, he suggests one last drink in a pub called Katy Daly. Inside he runs into another school friend, now a civil servant.

With gentle humour his old pal teases him, calling him a “lazy bastard”. But MacLaverty is unconcerned. “Look,” he says, peering into his glass, “there has to be sufficient reason to write a novel, a certain necessariness. You ought not to write to order.”

In an era in which the bourgeois novel has triumphed and career novelists employ superagents to negotiate outlandish advances, his remark strikes a rare note of integrity.