The Orange prize for fiction lumbers round again with all the keen competitiveness of an Islington sports day: admirable, but hardly a platform for the world’s top talent. Why is the Orange open only to women? Even golf, that bastion of sexism, now allows women to compete on equal terms with men. Are women writers disadvantaged? Bookshops burst with chick lit: to improve his chances of being published, a modern male writer might change his name to Georgina Eliot.

The £30,000 prize that was awarded last week also seems a little cosy: Andrea Levy, this year’s winner, is a past judge. So warning lights might flash as you settle down to her book Small Island; yet soon you will be enchanted. It is good enough to compete against anything written this year. What price the Booker? The story takes us back to a young West Indian woman in a starched floral dress and white gloves coming ashore in London’s Docklands during the first wave of immigration after the war. As Labour and the Tories currently battle each other over asylum seekers, the book reminds us that racial tension has been around a long time.

The surprise is that Levy — whose father came to Britain in 1948 on board the Empire Windrush, the first ship from the Caribbean, and faced much of the boarding house prejudice described in her novel — has no bitterness towards her family’s adopted homeland. Indeed, she is as patriotic in her way as those football fans sporting St George’s flags on their cars.

Having burrowed away at grammar school in north London, pushed by ambitious parents, she is a model for what immigrant communities can achieve. What offends her is press coverage that described Rose Tremain as the only Orange short-listed Briton. “It hurt me to think I am not regarded as British; I felt an outsider.”

Generally, though, she thinks Britain has been remarkably welcoming. “I’m always hopeful about Britain,” she smiles. “I don’t think we have done too badly on immigration. I’m very pleased I live in a country where that football commentator (Ron Atkinson, who called a player ‘a f****** thick lazy nigger’) lost his job for being racist — 30 years ago he only would have been sacked for swearing.”

Where strident racial campaigners might be scathing, Levy is sympathetic: even about the welcome that greeted those first Caribbean émigrés. “Everyone in that first chunk of people to come over was horrified by the squalor. But you have to remember, London had been devastated by the war. In Jamaica they always said to people going to Britain, ‘You won’t find any food there’. In Jamaica they might not have had much, but they did have food. Their huge trunks were just full of food.”

Small Island is full of fine observation about the lives of those first immigrants gleaned by badgering her mother Hortense, 84, for recollections. Its heroine shares her name and profession (she rose to become a deputy head teacher while papa, now dead, was a Post Office clerk).

“The idea of being British was to be very smartly dressed, well spoken with a hat and white gloves, but my parents found everyone huddled in scruffy coats and scarves. It must have been incredibly shocking. That generation is probably still reeling,” she smiles.

“People came with the idea of being here for five years and then going back, but if they were earning £5 a week and renting a room for £3, they were never going to get back to the Caribbean in a hurry. It wasn’t just that it was grey; it was a tough, hostile life. I take my hat off to that generation.”

By comparison, Levy’s life was pretty easy. “I suffered racism — my friends would call me darkie one day and not talk to me — but I didn’t really think of myself as black,” she says. “I have also had a lot of affection from white people.” Yet the book is unfashionable for being a celebration of multiculturalism.

Trevor Phillips, head of the Commission for Racial Equality, declares multiculturalism dead, warning immigrants that they must assimilate. “I don’t like the term assimilation. I like the term integration. Assimilation means you must not eat rice and peas and instead eat boiled cabbage. Mind you,” she laughs, “I’m a big fan of pork pies.”

Looking suddenly serious she says: “Britain has always been multicultural. There have always been waves of immigration, of ‘bloody foreigners’: the Huguenots, Jews, even Belgians. It is misleading to think Britain was ever a heterogeneous paradise.”

But while white immigrants have largely succeeded, there are scandalously few blacks who have matched Levy’s achievements: has she found it hard? “How hard is hard? That argument doesn’t lead us anywhere,” she says. “London is full of people from different places. I speak to so many whites who say they have come from here or there and you wouldn’t know it.” And they, too, face prejudice. She thinks of those signs outside pubs in the 1950s: “no blacks, Irish or dogs”.