Look for the religion section of almost any bookshop in Britain, and you'll find it's been subsumed under "Mind, body and spirit". The reason is simple: what we call religion has changed – dramatically – in just the past 30 years.

I think the change is so significant we can call it a "de-reformation" of religion. In other words, the main features that have characterised religion in Britain since the Reformation of the 16th century have given way. For most people, religion has ceased to be a matter of belonging to a clerically led community, affirming unchanging dogma, participating in prescribed rituals, and holding conservative social attitudes. It's transformed into something else.

Let's start with rituals, both national and personal. From the Hillsborough disaster in 1989 onwards, the church has gradually ceded control. It still has a role to play, but by the time of Diana's death in 1997, that role had become secondary to popular practices and innovations. Similarly, the churches' hold over birth, marriage, and death has weakened dramatically.

Religious belonging has transformed as well. It used to be about local and national belonging. Now it's a matter of association with like-minded people by way of real and virtual networks that transcend local and national boundaries. A British Muslim, for example, may associate face-to-face with a few like-minded friends, spend a lot of time reading and chatting on the web, feel part of a global ummah, and long to go on hajj. And you can say something similar for young Catholics, evangelicals, neo-pagans and others.

The statistics on church attendance confirm it. Between 1950 and 1980 attendance halved, and between 1980 and 2005 halved again – down to 6.3% of the population, according to Christian Research.

What we believe in has changed at the same time. According to British Religion in Numbers, belief in "a personal God" roughly halved between 1961 and 2000 – from 57% of the population to 26%. But over the same period belief in a "spirit or life force" doubled – from 22% to 44%. And 41% of us now believe in angels, 53% in an afterlife and 70% in a soul – that's much higher, often double, than when the records began. And you can't just say this is a growth in superstition – because belief in fortune-telling and astrology has not risen.

Turning finally to religious identity, 72% declared themselves Christian in the 2001 Census, yet fewer and fewer claim to belong to a religion, and the number declaring "no religion" has grown from 31% in 1983 to 51% in 2009 , according to British Social Attitudes. There's also a lot more "mash-up" religion around – plenty of Christian Buddhists, Muslim reiki practitioners, even Christian atheists. Religious identity has now become an essentially contested achievement, forged in an exploding market of offers.

So what's going on? Those who have even noticed the shifts have tended to dismiss them by saying that real dogmatic religion has been declining, leaving people with a muddled and fuzzy residue. I think the exact opposite is true. Turn it on its head and you see it the right way round: real religion – which is to say everyday, lived religion – is thriving and evolving, while hierarchical, institutionalised, dogmatic forms of religion are marginalised. Religion has returned to the core business of sustaining everyday life, supporting relations with the living and the dead, and managing misfortune. That's why angels, cathedrals, pilgrimages and retreats are all doing well. And why mind, body, spirit has taken over from theology in the bookshops.

Why be surprised or dismissive? In democratic, consumerist societies we believe that we are responsible for own choices, and that our participation counts. We don't want to be preached at any more, we want to participate and test things out for ourselves. It doesn't mean we are anti-tradition, that Christians cease to tick "Christian" on the census, that young Muslims stop reading the Qur'an, or that young Catholics don't turn out for the Pope. We appreciate tradition, but want to discover and sift it for ourselves, with people we trust.

It's misleading now to think of six or nine world religions, of pre-packaged traditions into which individuals can be subsumed without remainder. The monopolies have broken down. Religious leaders don't have the same authority. Religious identity is more individual, more idiosyncratic, more interesting.

The tragedy is that we continue to asphalt over all this change and variety with simplistic understandings of religion rooted in the past, and all too often projecting some sort of fundamentalist understanding. The effect is to let religious and secular extremes get away with it – get away with telling us that only dogmatic, conservative, totalising religion is real religion. It isn't, and it's time to stop dwelling on minority extremes at the expense of the middle ground majority – which is to say, most of us.

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