To swap the positions of the layers, simply click on the lower one with your mouse and drag it up above the top one. When you let go it will snap into position.
Now if we shrink the top layer (the image layer), some of the white bottom layer will show around the edges, creating the border we want. The tool to do this is the Scale transformation, which you'll find in the Image menu under Resize.
Click on one of the drag handles in the corner of the layer, and while holding down the "Alt" key on your keyboard, drag it towards the centre of the image. Holding the Alt key means that the transform is performed symmetrically and the image remains centred, producing an even border all around the image. When you've made the border the size you want, press return or click on the tick on the edge of the layer to confirm the transformation.
When you're happy with the result, flatten the layers back down to a single background image an d save your work under a new file name, so that you don't overwrite your original image.
Your result should look something like this. You can almost hear the air-raid sirens.