On the eve of her 77th birthday, children’s illustrator Shirley Hughes is on the cusp. She is entering, she says, a heady and exhilarating phase of creativity. Nevertheless, she was surprised to win the much-coveted CILIP Kate Greenaway Medal for illustration last week. It’s not that she’s coy - Shirley Hughes is far too down to earth for that - it’s just that she’s been around for so long, she says, that she didn’t think anyone would notice. What the judges did notice in her award-winning book, Ella’s Big Chance: a fairy tale retold, was her “outstanding craftsmanship”, “exceptional sense of composition and a gorgeous use of colour”.

Ella’s Big Chance is a luscious retelling of Cinderella for the older child, set in the glamorous Art Deco period of the 1920s, with a buxom Renoiresque heroine, stick-insect stepsisters and a glorious twist to the ending. The sumptuously theatrical spreads are complemented by cameos of black and white line drawings, extending the detail of the narrative, lending insight into characters and setting. A masterly command of drawing underpins every picture, something this dowager of children’s illustration passionately believes is essential to the profession.

And it doesn’t happen overnight. It is only now, nearly 50 years since she began to hawk her drawings around publishers, that Shirley Hughes feels her work is really beginning to take flight. Sitting in the home near London’s Holland Park, she gestures into the summer light dancing through the window, just as it does in so many of her pictures. “I’m glad this is happening to me now; I would hate to have been set in my ways earlier on,” she says, delighted to be so inspired in her dotage. “I’m working on something big, really exciting.”

Shirley Hughes is the antidote to the stardom-or-nothing mentality that dominates so much of contemporary culture. She believes in the slow burn, the hard slog, the honing of craftsmanship. All illustrators should learn to draw, she says, and they should practise constantly, as a musician practises an instrument. She has been “at it”, working in sketchbooks, fine-tuning her line and colour, since she first won the Greenaway medal 26 years ago with Dogger, the quintessentially English story of a little boy who loses his treasured cuddly toy, a book that has become a children’s classic.

Many books have followed, notably the Alfie and Annie Rose narratives, which capture in gestural line and soft tonal colour the domestic minutiae of the daily lives of inner-city families. Now she is moving on, illustrating for the older child up to top primary years. She has developed a new structure for her pages, with panels of text and black and white line drawings flanking spreads of richly coloured settings, allowing plenty of ventilation for the developing imagination. “These books have a bigger feel to them; their intention is to move the child on to legend and poetry and more complex stories, to start exploring things for themselves,” she says.

“I work tonally: the page has a three-dimensional quality like a stage, so children can linger in there and fantasise about what isn’t in the picture.”

Shirley Hughes strongly believes older children still need pictures in their books. “It is sad that black and white illustrations, once so common in books for older children, are now often missing, and the jump from full-colour picture books to an unventilated page of solid text is such an abrupt one. We are penalising (the child reader) for having mastered the magic skill of reading.” She regrets even more that the child’s free-roaming imagination is often engulfed these days by the big movie. “A child who sets off reading Harry Potter has no pictures on the page, but whatever pictures they form in their head are soon swept away by the movie.”

Good drawings, she believes, stimulate the imagination, rather than limit it. But drawing must be able fluently to capture a gesture, the look of a face, the cut of a suit. Ella’s Big Chance, the story of a talented dressmaker who has to slave over her sewing machine while her stepsisters parade the latest fashions in her father’s dress shop, is full of delicious costumes, 1920s low-waisted frocks with inventive patterns and fine detail, all designed by Shirley Hughes herself. She was inspired by the French coutouriers Doucet, Poiret and Patou, whose designs she knows and loves.

Clothes, she says, play a crucial role in providing disguise, intrigue and symbolism in fairytale and traditional narrative, a significance she exploits to the full in these recent works.

She grew up in West Kirby, Liverpool, and was set her on her path to the visual arts by a childhood full of comics, seaside shows, dressing up, and films with plenty of time for “mooching about” and daydreaming in a wartime Britain where recreational opportunities were severly limited. She went on to study fashion and dress design at Liverpool school of art (she still makes many of her own stylish clothes) and then on to Oxford and the Ruskin school of drawing and fine art. From the 1950s onwards she developed as a book illustrator, turning her hand to anything that came her way. Over the years she has published 50 of her own titles and illustrated hundreds of others, a record that in 1999 earned her an OBE for services to children’s literature.

She has always admired the work of illustrators such as Ernest Shepard, William Nicholson and, especially, Edward Ardizzone, whose versatility and fluency she has sought to follow. “Ardizzone was one of the last great illustrators who could turn his hand to almost anything. To me that is what good illustration is all about.” She regrets that art schools no longer teach young people how to draw, and suspects this missing skill is contributing to the plethora of children’s books with flat, collage-like designs and a lack of convincing human characters. “It’s much easier to draw furry animals than a human figure or face, and good drawing has to underpin even the most uninhibited colour techniques. I work in sketchbooks all the time and I let rip with the colour, but the drawing is always there.”

Many of her early books were inspired by her own busy family life bringing up three children. Her drawings are derived from the thick of domestic activity and close observation of children - playing in the park, hiding behind the living room curtains, making their own worlds out of cardboard boxes. Even the latest books for older children are informed by an instinctive sympathy and understanding of growing up. Now Shirley Hughes’s children are long grown up - Clara Vulliamy, her daughter, is also a children’s illustrator - she has her own room to work in, she has time, energy and inspiration. “I start work around 9.30am and carry on until I am tired. It’s bliss.” Shirley Hughes, play on.

Ella’s Big Chance: a fairy tale retold by Shirley Hughes is published by The Bodley Head