In the first review of its voluntary-sector funding since 1985, the ALG has decided not to renew the grants given to educational outreach programmes at the Royal Court and Sadler’s Wells theatres. Funding for the Young Vic theatre has also been reduced.

The ALG claims that the money would be better spent on grass-roots local programmes, which do not receive significant grants from other sources.

Jean-Luc Choplin, chief executive of Sadler’s Wells, which has lost pound;70,000 of annual ALG funding, said: “Our community and education work stresses social inclusion, cultural diversity and work with groups suffering economic deprivation. We have been delivering in all areas the ALG prioritise for funding. We’ll have to rethink our strategy now.”

Since the ALG’s decision, the Young Vic’s grant has been reduced from pound;52,000 to pound;30,000, threatening its work with schools in the deprived south London boroughs of Southwark and Lambeth. And the Royal Court will lose the pound;32,000 grant that pays for 30 per cent of its Young Writers projects. These programmes provide opportunities for young people to work with professional actors and playwrights, writing and producing their own plays.

James Dove, head of drama at Hurlingham and Chelsea comprehensive, in south London, believes that the Royal Court programme engages disaffected pupils.

“These kids don’t believe in the education system. But the talent is there.

This isn’t about rules and regulations. It lets them draw on their experiences, to access that talent,” he said.

A spokesperson for the ALG said: “We were massively oversubscribed for the amount of money we had, and had to come up with the package best suited to London’s diverse communities. This is tax payers’ money, and we have to make sure it goes where it is most needed.”