“It contained a world that was whole and made sense, unlike ours,” says Matilda, the teenaged narrator of this powerful novel, which bagged the Commonwealth prize in May. Matilda is talking about Great Expectations – a literary universe that is a quantum leap from her own tiny fishing community on a troubled little South Pacific island in the 1990s.

Most of the young men have disappeared into the jungle as rebels, and the scary civil unrest is creeping closer. Fear and tension grow. The school has closed weeks previously. Babies are dying through lack of malaria medicine. Then, one day, the only white man in the community, a shabby New Zealander known as “Pop Eye”, reopens the classroom. The children are used to seeing Pop Eye inexplicably wearing a clown’s nose and pulling his local wife around on a trolley. Now he is Mr Watts. He sits them down to read them Great Expectations, and they are hooked.

Lloyd Jones brings to life the transformative power of fiction. He shows how an alternative world can become more real than your own, how a story can teach you more about your life than anything closer to you; how it can cause conflict, resolution, fear and joy – and literally change lives. From time to time the children’s mothers pop into class to share their knowledge. They talk of how to kill an octupus by biting it above the eyes, how to cook a turtle shell-side down, and the necessity of trusting crabs above white men when it comes to weather predictions. When they leave, Mr Watts presses on with his world of words – Magwitch, convicts, blacksmiths and stopped clocks: the children are mesmerised.

The experience of reading in this book is tangible. It is dangerous, concrete, magical, true and untrustworthy. Words become entities: Matilda writes with stones, sticks and sand, and feels an unfamiliar word as a movement of her tongue. Fiction is also threatening. It is on hearing the alien word “rimy” that Matilda’s mother turns against the book. “I was biting off a bigger piece of the world than she could handle with language like ‘a rimy morning’. ” She steals the book and hides it, with devastating consequences for the whole community.

The rebel soldiers, with their dead eyes, finally show up in the village. They get a whiff of a hidden “Mr Pip” and demand to see him. Since nobody can produce either Mr Pip or Great Expectations, they burn everybody’s possessions and huts. As their parents begin to rebuild, so do the children. They start to reconstruct Great Expectations from fragments of memory, words that pop into their heads, phrases and concepts.

This is a beautiful book. It is tender, multi-layered and redemptive. The utterly horrifying event that changes Matilda’s world forever is written without a trace of sensationalism, and is all the more appalling for it. The last few chapters (a portrait of Matilda as a grown woman) feel unnecessary. However, they do not detract from this rich and memorable examination of literature as life.

Mister Pip by Lloyd Jones
J Murray £12.99 pp223
Buy the book here at the offer price of £11.69 (including p&p)

Times Recommends

• The Sunday Times 100 best holiday reads
• What will we be reading this summer: the booksellers predict
• Literary festivals: a survivor’s guide