“It’s so frustrating when people always talk about children’s theatre ‘building the audience of tomorrow’. When do you start being a valid audience?” demands the Polka Theatre’s artistic director, Vicky Ireland. “The children who come to Polka are today’s audience. It’s not my responsibility to capture them for the future, but to make sure it works on this occasion.”

Polka, the dynamic children’s theatre in Wimbledon, south London, has been focusing on “today’s audience” for more than two decades. Around 100,000 children visit Polka each year, and this season the theatre celebrates its 21st birthday. Many of the parents and teachers bringing today’s audiences visited Polka themselves while growing up. Writer Malorie Blackman (author of bestselling novels such as Noughts amp; Crosses, Hacker and Pig-Heart Boy, which she turned into a Bafta-winning TV drama) attended Polka workshops as a teenager. Now Ms Blackman has been commissioned to write Polka’s birthday production - a celebratory romp for four to seven-year-olds called The Amazing Birthday.

It’s an uncharacteristically pantomimey piece for Polka - it has an air of Grand Guignol, with catchy songs and spangly costumes. A seven-year-old boy gets huffy when he doesn’t get the present he wanted, and has to learn to enjoy himself anyway. Birthdays are special, the play reminds us; but, most importantly, the next birthday is always the best one.

This message is uncannily ironic for Polka. Despite 21 years of excellence and innovation, it has been offered only a wafer-thin slice (pound;120,000) of the Government’s extra pound;25 million funding for theatres. It’s a hard blow for Ms Ireland, artistic director for the past 12 years, who had harboured deservedly high hopes of a substantially increased budget. “Children’s theatre, like adult theatre, needs proper investment,“she says. “We can’t take all the risks we’d like. We’re tip-toeing too carefully. We need to be recognised as a theatre of new writing - the young person’s Royal Court. We need seed money to grow new productions properly and slowly. There’s no fringe theatre for children, so there’s not enough experimentation.”

There are few children’s theatres in the world generating their own productions as Polka does, and even fewer opportunities to publish new plays for children. Ms Ireland is desperately keen to increase the repertoire. Last Christmas, she points out, Birmingham Repertory Theatre persuaded Timberlake Wertenbaker to write Cinderella - The Ash Girl. “It’s great that someone of her quality and standing was asked to create a family piece. More top dramatists need to find out what a liberation writing for children can be.”

By teaming up with the Japan 2001 festival, Ms Ireland has managed to lure an inventive Japanese designer, Kimino Karno, to work with her on Polka’s next production, a new adaptation of Michael Morpurgo’s novel Kensuke’s Kingdom (May 3 to June 9). The theatre’s book adaptations, including Mary Norton’s The Borrowers, Jacqueline Wilson’s The Lottie Project and, coming this autumn, Ian Serraillier’s The Silver Sword, are box-office dependales. But Ms Ireland is particularly proud of its riskier ventures such as Playing from the Heart by Charles Way, based on the autobiography of percussionist Evelyn Glennie (touring in Scotland from the end of May) and David Glass’s exuberant show Off the Wall, which brought to life paintings and sculptures from the Tate collections.

When Polka did receive funding for a writer in residence in 1992, the result was Bernard Kops’s award-winning play The Dreams of Anne Frank, which has had hundreds of productions worldwide (including an extraordinary performance by a group of Gypsy children in Hungary). “I really felt I could push outwards and experiment,” says Mr Kops, who had not previously written for children. “I’m grateful to Polka for having the foresight to open the door.”

“A lot of the plays we’d like to do, we can’t sell,” Ms Ireland admits. “Teachers have to be able to justify an outing. We need to produce known titles such as The Tempest or Beowulf, and choose things that fit in with the curriculum - something that boosts study of the Victorians or the Greek myths, for example. Teachers need to feel a play has a long life for them, providing lots of preparation or follow-up work.

“Fitting in with the curriculum does drive out brave new writing. Some of the creative verve is knocked off.”

Plenty of that creative verve has gone into Polka’s latest education initiative, Webplay - an innovative classroom ICT and drama project that brings together Year 3 and 4 pupils from five primary schools across the London boroughs of Merton and Southwark and their counterparts in Los Angeles. The children compared notes by email (“Your royal family live in Buckingham Palace and you eat frogs’ legs,” one eight-year-old Californian has justemailed in). The London pupils have been working with professional actors to create a play, Moon Shadow, which is being performed in LA for their e-pals this week.

“We brainstormed with children in the London schools to find out what subjects occupied them,” Polka’s education officer, Rebecca Hazzard, recalls. “They wanted a play about arcade games, bullying, and going back in time, with a mystery to solve.”

Now comes the Londoners’ chance to find out what the LA kids made of Moon Shadow as each class makes its own play in response, and videos the performance for downloading by the pupils’ transatlantic counterparts.

Polka has just set up a children’s council of seven to 12-year-olds, which will advise on the kinds of plays the children would like to see developed. To broaden access, it is participating in City Action’s community development programme through Curtain Up!, which pays for tickets and transport for theatre first-timers at underprivileged schools in inner London. And it has joined other children’s theatres such as Half Moon, Little Angel, Bull Arts Centre, and Battersea Arts Centre to create the first London Festival of Children’s Theatre between March 30 and April 12. That sounds like a pretty amazing birthday party.

Polka Theatre, 240 The Broadway, Wimbledon, London SW19 1SB. Tel: 020 8543 4888. The Amazing Birthday runs until March 31. London Festival of Children’s Theatre, tel: 020 8275 5375