"I can show you why the Church of England is completely fucked," said the vicar. He showed me an email he had just received from the diocesan authorities about his "continuing ministerial development" – in effect his annual performance review. It came with 20 attachments, from A to T, 19 of which he was supposed to read before filling out the form on how well he was doing.

Two things might be added to this story. The first is that his performance as measured by this form would have no impact on his salary and not much on his career prospects. The second is that it came from Southwark.

Southwark, which means London south of the Thames, has everything that makes the Church of England newsworthy. It has 326 paid clergy: some are liberal and some so reactionary that they think everything has gone downhill since the liberal reforms of the 1662 prayer book. The former cathedral canon, Jeffrey John, is the most famous gay clergyman in Britain, while the evangelical church of St Mark's, Battersea Rise, is one of the English embassies of the homophobic African grouping Gafcon. There are lots of less famous gay clergy (and some overlap, here, with the homophobic lot). A former bishop had to be poured out of a stranger's car after an Irish embassy party – oh, yes, Southwark has everything, except congregations.

Out of a population of about 2.6 million, roughly 45,000 attend Anglican churches most weeks. And whereas the Diocese of London, north of the river, has managed to show some increase in attendance, in Southwark it continues to slide. Even the kind of belonging measured by baptism has diminished, so that there are now about half as many every year as there were in 1980.

This in turn points to the most worrying figures for the Church of England in the reworking of the census statistic published last week by the Office of National Statistics. That shows that the median age of Christians in this country is 45; the median age of Muslims is 25.

The ONS does not distinguish among different Christian denominations any more than the census did. But its finding that the number of British-born Christians fell by 15% in the 10 years between 2001 and 2011 while the number of foreign-born ones increased by 1.2 million is also really bad for the Church of England. Hardly any of the immigrants were Anglicans, or became Anglican. In south London this is obvious from the profusion of pentecostal churches, mostly nowadays west African.

Catholic immigrants have tended to remain Catholics, of course, which has disguised the fall in native-born numbers much better than happened in the Church of England.

Yet this may not have been inevitable. What is extraordinary is the tally of advantages the Church of England has failed to capitalise upon. Its considerable social reach, its schools, and its place in civic and political life, none of them have seemed to make it convincing. It is not even convincing from the inside: a friend of mine in his early 40s, who has worked at Lambeth Palace and now has a good chaplaincy, says people of his generation are all as cynical about the organisation as the party members were in the last days of the USSR. They know that all the official stories are lies, and are waiting and hoping for some Gorbachev-like figure who will admit this.

Considering what happened to Gorbachev, there may not be many volunteers for the position.

Yet the decline of the Church of England, and of Christianity generally, does not mean that people are rushing towards atheism. "There absolutely isn't a national decline of religion," says Linda Woodhead, professor of the sociology of religion at Lancaster University and one of the organisers of the Westminster faith debates. Those have been based on surveys of public opinion that have shown with great clarity that the congregations in all the mainstream churches are much more socially liberal than the clergy.

"What has happened is a complete disjunction between the values of the church and the values of the population," says Woodhead. "The church has clericalised until it's just clergy and lay ministers talking to each other. The public are not an audience for this debate. And you can't have a minority gospel for a majority religion."

Nowhere is this clearer than in the absurd and humiliating tangle that the Church of England has got itself into about women priests. On Monday the church's bishops begin a two-day meeting that is meant to result in legislation that will lead to the appointment of women bishops in three years' time – assuming agreement is reached. And that really is the quickest that anything can happen.

Even if Justin Welby does turn out to be the church's Gorbachev, it looks as if it really needs someone who can work miracles instead.

• This article was amended on 20 May 2013. It originally referred to Jeffrey John as a former dean of Southwark. He is actually a former canon of the cathedral. This has now been corrected.