The Church of England is in crisis. Its position on women bishops and gay marriage has alienated much of society. Robert McCrum visits its parishes and asks if the future lies with those it has spurned

In Racing Demon, David Hare's 1990 play about the Church of England, Lionel, a troubled priest in search of answers, makes a heartfelt plea. "God. Where are you?" he asks as the curtain rises. "There are an awful lot of people in a very bad way. And they need something beside silence. Do you understand?"

Twenty years ago there was an impending drama in the church, linked to faith. Now there's a full-blown crisis that reaches far beyond theology, and the church that tends to advertise a hotline to the almighty – after all, God is an Englishman – has a hard time making sense of His teaching in contemporary England. The General Synod of the Church of England met this month in York: once upon a time, it was all gas and gaiters, but now, when the delegates debate the issues of the moment – women bishops and same-sex marriage – they find themselves trapped in a hell of their own making.

Made up of three parts – the House of Bishops, the House of Clergy and the House of Laity, representing the lay churchgoers from parishes around the country – the Synod must pass any rulings on doctrine through the eye of a needle. Amendments to the established church's constitution – such as the appointment of women bishops – need a two-thirds majority in each of these three houses. That's when church politics becomes toxic. One Synod member, speaking on condition of anonymity, describes the atmosphere: "When I first went to Synod I was really shocked by the way it worked, but I've got used to it. There's a lot of warm embraces – at the same time muttering in corners and huddles around tables in the tea room. It reminds me of school – you see who to sit with. There are the noisy bullies and the quiet marginal people, the in crowd and the loners. There are flashes of purple – bishops being matey. When there's a big debate, you feel the strategising in the atmosphere. It seems a long way away from the love of Jesus!"

On 21 November 2012, on a motion to allow women to become bishops, the House of Laity, opposing the ordained clergy, staged a revolt. Its 64% vote for women bishops fell just six votes short of the required majority, a narrow but decisive defeat.

The traditionalists were jubilant. Among the bishops and clergy there was shock, disbelief, anger and despair at a historic wrong turn. Andrew Brown, the Guardian's editor of Cif Belief wrote: "I have just watched the Church of England commit suicide."

Most perilous of all, this catastrophe occurred as one Archbishop of Canterbury, Rowan Williams, was retiring and a younger man, the Bishop of Durham, Justin Welby, was taking over. Rowan Williams, expressing a "deep personal sadness" at the vote, wished his successor "every blessing" in sorting out an ecclesiastical multinational in the throes of an institutional nervous breakdown. Welby, recognising the gravity of the situation he had just inherited, used Twitter to advertise his mood: "Very grim day, most of all for women priests and supporters." The new archbishop is known as a seasoned conciliator, a veteran of conflict resolution in the killing fields of the Niger delta. But even Welby seemed at a loss as to how to clear up the mess. The way forward, he said, was "to co-operate with our healing God".

Exactly what this emollient formula amounted to became clear in the run-up to the recent Synod in York. In advance of the meeting, the word from Lambeth was that the new archbishop did not want to get boxed in on sexual politics. Still, he found himself in the Lords making votes against, for example, the Marriage (Same Sex Couples) Bill where some had wanted him to abstain.

Perhaps no amount of political finesse could disguise the reality of an established church that, after the 2012 vote, seems either fatally wounded or hopelessly irrelevant. The Reverend Lucy Winkett, who might have been expected to become a woman bishop, wrote that the Synod was "detonating its credibility with contemporary Britain". Just below the headlines, that credibility is already threadbare. Behind the debate on women bishops, there are unresolved questions about the ministry of gay priests and the infinitely more difficult issue of same-sex marriage. Canon Giles Goddard of St John's Waterloo says that "people oppose women bishops because they know gay marriage will be next". At the York Synod, to the despair of reformers, Welby appeared to renew his opposition to same-sex unions.

Goddard, whose partner sings in the church choir, is one of a handful of avowedly gay priests who says he feels "hampered by a perception of the church – misogynistic and homophobic – that trumps all the other good stuff we are trying to do". Goddard believes that these are "justice issues. I don't think Archbishop Welby has realised how important these issues are to the way in which the church is perceived."

‘We’re all God’s children’: a boy plays during the service at St Mary’s Church, Tenbury Wells. Photograph: Karen Robinson for the Observer

Perception is one thing. In reality the Church of England faces some intractable problems, most of them financial. About one third of all clergy is in debt, and money has become a problem for the church as a whole. With no subsidy from the state, the C of E has annual outgoings of about £900m, a figure that conceals a looming pension crisis. Its portfolio of about £8bn, better managed in a stronger market, should cushion it from bankruptcy, but the capital costs of churches and vicarages remain a constant headache.

Add to this a steady decline in recruitment (fewer ordinands), plus a long-term fall in the numbers of British-born Christians, and Welby's challenge is an unenviable one. Disaffected vicars complain about vanishing congregations who still expect the C of E to officiate at weddings and funerals. Among what some call "the unchurched", it's a bleak picture of secularisation. There's no singing because no one knows the music. Only two hymns – "Morning Has Broken" and "All Things Bright and Beautiful" – get any recognition. From some points of view, the Anglican communion (of which the Church of England is just a small part) is at its most vigorous overseas, reflecting empire days.

Welby, a former Elf oil executive, likes to say that the church is not just a rotary club with a pointed roof. The C of E cannot default on its spiritual mission but compensate with tea and biscuits. Under the new archbishop, its crisis will be framed as a conflict between theology and politics. Issues of poverty, not sex, are central to Welby's vision. He is said to be willing to promote the church's traditional astringency within society, and those who know Welby describe him as "fearless", but at Synod the new archbishop merely called for "integrity and transparency" and was accused of fence-sitting.

The irony of the present crisis is that the two groups – gays and women – that seem particularly alert to the needs of the church and extremely well suited to promote such a mission are currently excluded from the hierarchy. Giles Goddard, speaking for the gays in the church, places the blame on the Synod as a whole. He says: "We have been poorly led by the bishops who are afraid of losing the support of conservative parishes, with all the financial implications of such a move."

Yet on the ground, in the shires and cities, it seems to be gay clerics and women priests who are keeping the Church of England alive, and in touch with society, from day to day.

About 150 miles from Lambeth, amid the cow parsley of the English borders, lies Tenbury Wells, the largest and possibly the most traditional rural parish in England. Situated in the Doddingtree Hundred, and listed in the Domesday Book, Tenbury Wells demonstrates the Church of England at work. The parish illustrates the remarkable resilience of a traditional way of life deep in the English shires.

‘We’ve been poorly led by the bishops who are afraid of losing conservative parishes’: two members of the choir at St Mary’s Church, Tenbury Wells. Photograph: Karen Robinson for the Observer

Claire Lording is the vicar of Tenbury Wells. She's a strikingly tall, slim, smiley single woman of 38, prematurely grey but youthful and vigorous in demeanour. She's wearing a dog collar when she answers the door of the vicarage, a modern red-brick building occupying the site of the former rectory tennis court.

The dog collar shows that Rev Lording is on duty and will see the Observer between two parts of a funeral. She's just completed the burial service in St Mary's, two minutes away at the end of Church Street. Part two, which will follow later in the afternoon, will be the "committal" at a crematorium several miles distant.

Tenbury Wells covers about 30 square miles. It's a multi-parish, with 11 churches, and Claire Lording leads a team of 10 clergy, seven women and three men. She laughs off comparisons to the Vicar of Dibley, then confides that one of the parishes in her charge actually refers to itself as "Dibley", borrowing names and characters from the BBC series. She was ordained in 1999 and was, she says, "always churchgoing". Dedicated Anglicanism runs in the family. Claire's mother is chair of the Hereford diocesan House of Laity. Her daughter seems to have been born to the job.

When Lording arrived in the parish as its first woman priest, the only opposition – even in a conservative county – came from her choleric predecessor, who used to joke, she recalls with a laugh, about his "wicked woman". But now the issue of women priests is done and dusted, and the diocese is "overwhelmingly in favour", she says, of women bishops. Challenged about this controversy at the top of the church, Lording replies, very matter-of-factly, that: "We're all God's children."

In conversation Lording generally strikes a pragmatic, unchurchy note that, you imagine, plays well with farmers and landed gentry out here on the borders. Still, she believes in her mission. Describing herself as "a liberal Catholic", a label that covers the middle ground in the C of E, she says that her mission is "to share the gospel" and "to preach the love of God".

The Church of England's role in such a parish – of which there are hundreds across the kingdom – is to be present at the moments of greatest joy and sorrow, to mediate baptisms, weddings and funerals, and to provide a kind of invisible social and quasi-spiritual glue. This, says Giles Goddard, is what lies behind the battle over women bishops and gay marriage. "The church's role in heterosexual marriage," he says, "is vital to its identity within British society. Marriage gives it a role."

In the city, Goddard will celebrate the partnership of gay couples with a "service of thanksgiving and dedication", which is code for a gay blessing. Out in the country, Lording says that she, reluctantly, turns down requests for gay blessings. Her bishop would not like it; the Synod is hostile.

But the issue nags in her mind. "I wish the church would do blessings," she says. "That's what most people want, and what most people would settle for." In different ways, both Goddard and Lording are arriving at a pragmatic response to the issue that divides the Synod so bitterly. My mantra, says Lording, not quoting scripture, is: "It will be all right." In another age, this terribly English sentiment might have been expressed as "The Lord will provide" or "Sufficient unto the day is the evil thereof."

'I wish the church would do gay blessings. That’s what most people would settle for': the Rev Claire Lording in Tenbury Wells, Hereford. Photograph: Karen Robinson for the Observer

In St John's Waterloo, Giles Goddard is concerned to keep his church relevant to the lives of his parishioners. The rhythm of his ministry is different from Lording's, but there are some striking similarities. His Sunday congregation will number between 80 and 100; he believes it is important to "celebrate love"; for him, the church's role is to "help build the community, especially during a recession".

Goddard's city parish has its metropolitan grittiness, but is in some ways more conventional. Lording's approach in Tenbury Wells has its own radicalism: her answer to scarce resources within the church of England lies in mobilising the lay community. But here's the church's dilemma. It was the conservatives in the House of Laity that scuppered the Synod's vote on women bishops. How to enlist the army of the faithful for service in a cause to which they are viscerally opposed?

Thoroughly modern vicars, such as Goddard and Lording, represent the day-to-day resilience of the church in a changing society. Away from the high feelings provoked by women bishops and same-sex marriage, even in urban communities sometimes described as synonymous with hell on earth, the Church of England achieves a surprising degree of local traction.

On the road INTO Sparkbrook, past the Edgbaston cricket ground, there's an Asian man with a sandwich board, proclaiming: "God is Love". But which god ? This is one of the most multicultural and deprived wards in the UK. Among the under-25s, unemployment is close to 25%, and the community is overwhelmingly British Asian – Sikh, Bangladeshi and Pakistani.

The Rev Catherine Grylls, the parish priest of St Mary & St Ambrose, says hers is a "faith full community". As well as Muslims and Hindus, she can point to no fewer than six Christian denominations within her parish: Anglican, Baptist, Roman Catholic, United Reform, Wesleyan, and Church of God of Prophecy (Caribbean).

Rev Grylls is fully integrated with her neighbours. "I'm a wife, a mother and a priest," she says. "Being a priest is who I am, who I'm called to be, rather than what I'm called to do." Quietly self-confident, she has preached the gospel in all these churches and seems delighted with the diversity. "We all get together to worship," she says, and during Lent representatives from every church will meet to explore a fairly bracing agenda of sin, salvation and the Holy Spirit. "We celebrate our diversity," she reports, "and talk about life and death, heaven, hell, and the resurrection."

On Sundays, Grylls will hold services, back to back, in St Mary & St Ambrose, a red-brick Gothic revival barn of a building, and St Paul's Balsall Heath, a modern breeze-block chapel that doubles as a day-care centre in the heart of Asian Sparkbrook, on a street once notorious for prostitution.

The congregation in St Mary's, which boasts a choir, is predominantly Barbadian with a scattering of Chinese, Brummie whites and visitors. In St Paul's Brummie Asians are in a clear majority. The atmosphere in both is vital, warm, devout and informal. No one seems remotely troubled by the issue of women bishops, and they point with pride to Catherine Grylls as a fine contemporary example of a woman playing a dynamic role in the community.

Grylls herself believes, with some justification, that in parishes like hers the Church of England remains a source of stability as part of the social fabric. "It works best," she says, "when it's small and communal, committed to place and people." For Grylls, who has experienced the practice of a ministry first-hand, it must be "authentic and permeable", which is code for ethnically diverse, hospitable to other faiths, and not hung up on women bishops.

Grylls, who is a member of the General Synod, manages to sound both pragmatic and Christian. She speaks warmly of the Sparkbrook imam and believes, with Goddard and Lording, that the church must overcome its language (presentation) and "narrative" issues. This is another way of saying that its crisis is both self-inflicted and susceptible to reconciliation. "We should speak confidently about what we believe," says the Reverend Grylls, echoing a line that some of Welby's people put out before the York Synod. "We have to learn to be authentically ourselves, to live out our vocation and to be confident in preaching our faith."