Chris Cleave's novel Incendiary came out on 7 July 2005, the day Mohammed Sidique Khan, Shehzad Tanweer, Germaine Lindsay and Hasib Hussain killed themselves and 54 other people on the transport system in London. Incendiary told the story of a terrorist attack at a football match in London, from the perspective of a grieving mother. In the wake of the bombing, it was pulled from shops, the PR campaign was halted and many of the reviews were scathing. But on 7 July, that was the last thing on Chris Cleave's mind.

"I live in London," he says. "People were dead. I didn't know if my wife had died. She goes to work on the Northern Line and it was hours before I could get in touch with her. And it was the same for everyone because the mobile phone network had completely maxed out. So I felt the same sort of horror that everyone in London felt. And then I started thinking of how weird of a coincidence it was. I had a lot of problems struggling to come to terms with it.

"From a work point of view, that book was completely finished. All the marketing stopped. All of the promotion stopped. It was withdrawn from sale for the most part. As the New York Times said, many people considered it 'tasteless'. For me it became cursed. As a writer you feel really connected to your times when you're writing about them, so when something happens that you've spent a year visualising, trying to imagine the emotional responses of people involved... and then it happens, you really feel that you've somehow been changed by the experience. I actually became very depressed. I couldn't write at all for six months after that. It was a really dark time."

Cleave doesn't seek controversy for controversy's sake. He's a reflective, softly spoken thirtysomething who writes a fortnightly column about his children in The Guardian. His two novels (his second, The Other Hand, is out this week) are warm, witty and beautifully written stories about people caught up in the big issues of their times. And those are our issues – terrorism, immigration policy, third-way politics. Cleave doesn't wrap them in obfuscating allegory; he keeps them solidly and disconcertingly in the present day. Why go there?

"Sometimes I think it would be dangerous for a writer not to go there," he says. "I really try to look for stories that sum up what we're living through. I really hope that I write characters that are swimming in the times they're born into. But you open yourself up to criticism if you're writing about contemporary reality. It's easier to write about something that's done and dusted. Something that happened 20 years ago about which there's a received historical opinion already. So you're always going to start a debate rather than finish one, if you're writing about what's going on now. So I guess I really respect the people who laid into me after Incendiary. I actually like the fact that people can still have extreme reactions to literature. I suppose I want to inhabit that space between news journalism and history books. I want to write about the times in an engaged and entertaining way, from the point of view of someone living in them."

Now he's gone straight into contentious territory again. The Other Hand tells the story of a Nigerian asylum seeker, Little Bee, who arrives into the lives of Sarah, a London magazine editor, and her Batman-obsessed little boy, days after Sarah's husband committed suicide. The novel is alternatively narrated by Sarah and Little Bee, and the plot revolves around a mysterious and horrific event on a Nigerian beach (this is revealed about two-thirds of the way into the novel).

"There's our world, of getting our cars fixed and worrying about deadlines, and then there's the terrible world where refugees come from," says Cleave. "I was trying to get a circumstance where those two worlds would meet, and there are places in the world where holiday-makers are incredibly close to warzones. And Nigeria is one of those places. I was looking for a microcosm in which the developed world meets chaos.

"That's how that beach scene was born and I wrote the book in both directions forward and backwards from that. I thought it was really important that Little Bee and Sarah should meet in Little Bee's country first. I wanted to make a connection between the two characters, literally forged in blood, and it's the heart of the book."

So where did this all come from? Cleave's background is boringly middle class. Apart from an early childhood spent in Cameroon where his father worked for Guinness ("the 1970s were bleak in Britain. Everyone was trying to get away"), his professional life doesn't suggest either novelty or hardship – a period of time spent playing guitar in bands, three years working for the Daily Telegraph, three years with internet start-up Lastminute.com, and then a spell in France writing (with his French wife and their two children). He knows that, with this background, adopting the voice of an emotionally scarred Nigerian refugee could be problematic.

"That question of authenticity comes up a lot," he says. "People are very interested in memoir right now, and there's a whole debate about the authenticity of memoir. People are required to have an interesting life and to then write about it and push the limits of that into fiction, and that's the cutting edge of publishing at the moment. I guess I'm swimming against the current of that. I'm a boring person who writes about interesting people."

So Cleave's novel is based heavily on research and interviews. He has very strong views on immigration and that makes this a political work. It has very strong words about Britain's attitude towards countries like Nigeria (on the 'safe' list of countries from which the UK won't accept refugees, despite a brutal oil war), and also for British detention centres. Ireland will soon have refugee detention centres of its own, according to the Department of Justice. Maybe we should think twice?

"Detention centres in England match the text-book definition of concentration camps," says Cleave, who's visited one. "They concentrate people who were originally dispersed for ease of working out what to do with them. It was the British who first set up concentration camps in South Africa during the Boer War. And that's what these facilities technically are.

"I know it's a very polemical phrase. I'm not meaning to compare the severity of conditions inside them with concentration camps in the former Soviet Union or in Germany during World War II, but these people have not committed a crime, they're not charged with a crime and there isn't a formalised procedure for what's going to happen to them. Yet they're kept behind razor wire and they don't have their freedom.

"It's a big business. These places are run for profit by private companies. And asylum-seekers are in a sense a cash crop for these companies. Once you start doing this, then the profit motive for continuing to do it becomes huge. It's extremely expensive, and very cruel. And I think there are better ways of enforcing whatever immigration quotas a country decides to have.

"The Other Hand poses the question: what if this girl turned up on your doorstep and said: 'Can you help?' Once you develop a generic policy about what you're going to do with a group of asylum seekers, you end up treating them in a way that you wouldn't treat one asylum seeker. And that's where the denial is, because people allow the state to deal with it out of sight. It's not how we'd deal with it as individuals."

But again, why go there? Surely he could find some safe historical allegory and write a book making similar points? "When you've got children, you're worrying all the time about getting the Batman costume washed and getting their story read, about taking them to school or playgroup. Life is a set of small little tasks you try to do with love, and then you step back and think: 'That's our little bubble, but the whole world is turning into shit and chaos. What can I do about the big picture?'

"I want to be able to turn around to my kids in 20 years' time when they're starting to judge me and be able to say that at least I was trying to engage with the times I was living in. Because the next generation is going to reproach us if we don't get our act together about human rights and the way people are treated."

He takes comfort from other artists who made art about contemporary reality. "The ultimate granddaddy of all this is Picasso," he says. "Recently I went to Madrid and stood in front of 'Guernica' [Picasso's masterpiece about the bombing of that town by Nazi planes during the Spanish civil war] for a day. I had a real moment just looking at that thing. Picasso didn't really have soul in his work until Guernica. And then he had this mad breakthrough and became completely engaged with his time.

"There's a story about an SS officer walking into Picasso's studio on the Left Bank after the Germans occupied Paris, and he was so pleased to meet him, because Picasso was quite famous at that stage. Anyway, they decide they're not going to requisition the studio, and that they're going to let him keep on painting, when the officer spies a stack of postcards of Guernica. The officer asks, 'Is this one of yours?' and Picasso says, 'No, it's one of yours. Take it. It's a souvenir.'"

Three years on, people are now beginning to appreciate Incendiary. A film version featuring Michelle Williams and Ewan McGregor will be in cinemas later this year, and Cleave is already writing a third book about love in the Blair years. For the time being, we have The Other Hand, a troubling and bittersweet story about the times in which we live. Take it. It's a souvenir.

'The Other Hand' is

published by Hodder and Stoughton on Friday