Everything in the Garden looks lovely

Passion, conflict, drama... and that's before the curtain rises. After six magnificent and stormy decades, the Royal Opera still hits the high notes.

The house lights dim, the atmosphere subsides into an expectant hush. A crackle of applause, a flowering of sound from the orchestra and the red velvet curtain swishes aside. That moment never loses its magic: you're transported from the crimson shadows straight to Seville or Valhalla, St Petersburg or Paris. Opera at its finest brings together more arts than any other medium: music, live performance, design, drama, sometimes dancing and even film. And once the opera bug has bitten you, nothing can compete with a night at the Royal Opera House, Covent Garden.

This year, the Royal Opera is celebrating its diamond jubilee with an exhibition recalling key moments in its past 60 years. Dame Joan Sutherland is to open it on 22 January, at the theatre where the soprano so often thrilled her fans. With items on show that include Sutherland's gown from Lucrezia Borgia in 1980, costumes designed by Cecil Beaton for Turandot in 1963, and Aubrey Beardsley's black-and-white outfits and headdresses, realised for La Traviata in 1967, the exhibition promises to celebrate all that's finest in this national opera company's colourful history. It's a saga of huge personalities, glorious artistic highs and mind-boggling political lows that even now - with the house in better shape than it's been for a decade or three - makes it the most controversial arts organisation in Britain.

A theatre has stood on this prime central London site since 1728; the current opera house, with its distinctive pillared white façade, went up amid the old Covent Garden market in 1858. During the Second World War, the venue turned into a dance hall, but in 1945 music publisher Boosey & Hawkes acquired the lease and set out to ensure that it would be transformed into a national lyric theatre for opera and ballet. The house became the home first of the Sadler's Wells Ballet and then of the newly formed Covent Garden Opera Company. It received, meanwhile, the new British Arts Council's largest grant.

An era of history-forging performances quickly ensued under the music directorship of Karl Rankl and, from 1955, Rafael Kubelik. Dame Eva Turner gave her farewell performance as Turandot in 1947, the year that also saw the first schools' matinée and the house's first staging of Benjamin Britten's Peter Grimes. Two years later came the company's first Ring cycle, plus a dazzling production of Strauss's Salome directed by Peter Brook and designed by Salvador Dali. The 1950s brought the Covent Garden debuts of Maria Callas as Norma (1953) and Joan Sutherland as Donizetti's Lucia di Lammermoor (1959). There were farewells too: Kirsten Flagstad gave her last Covent Garden performance in Tristan und Isolde in 1951, summoned back for 21 curtain calls, and Kathleen Ferrier sang Gluck's Orfeo ed Euridice shortly before her premature death in 1953.

London's cultural life in the 1960s amounted to a veritable golden age. Seats were affordable, and the artistry was the finest in existence. At the ballet, audiences could flock to watch Margot Fonteyn and Moira Shearer; great actors such as Laurence Olivier, John Gielgud and Peggy Ashcroft dominated the theatre world; in concert halls, music-lovers thrilled to the tones of young luminaries such as Daniel Barenboim, Jacqueline du Pré and Itzhak Perlman. Opera was no exception in this embarrassment of riches, and at the ROH it was a time of big stars in every department.

With productions directed by Visconti and Franco Zeffirelli, designs by the likes of Beaton and Beardsley, singers including Sutherland and the young Luciano Pavarotti, and Georg Solti as music director from 1961 to 1970, Covent Garden was flying high. Maria Callas sang her historic Tosca with Tito Gobbi as Scarpia. Wagner's Ring cycle in 1964 was directed by the veteran bass Hans Hotter, conducted by Solti and introduced the soprano Gwyneth Jones as a Brünnhilde who would dominate the role for years.

In 1965 Solti dared to bring in Schoenberg's opera Moses und Aron for its British premiere, directed by Peter Hall. "You'll find it difficult at first, but for me, now, it is just like Mozart," the Hungarian maestro told a press conference. And at the end of the decade, the Covent Garden Opera Company landed its royal charter and found itself transformed into the Royal Opera.

As time went by, and the music director's reins were handed over first to Colin Davis, then in 1986 to Bernard Haitink, the Royal Opera continued to mix standard repertoire and stars such as Placido Domingo, José Carreras and Kiri Te Kanawa with occasional if sizeable risks. Over time, the house commissioned and premiered four operas by Michael Tippett, as well as Britten's Billy Budd and Gloriana. The premiere in 1985 of Karlheinz Stockhausen's Donnerstag aus Licht was a breath of fresh air in what had otherwise become an artistically arid and unfortunate period.

A tradition of high-profile premieres and commissions persisted, though - among the most notable being Birtwistle's Gawain in 1991, in which the French baritone Francois Le Roux made history by appearing on stage completely nude. Among more recent premieres, Nicholas Maw's Sophie's Choice in 2002 received a cautiously warm reception. Lorin Maazel's 1984, staged in 2005, was so widely loathed that a collective sigh of relief went up that its production had in fact been paid for by the composer himself. But Thomas Adès's The Tempest, which is being revived this March, has proved that rare phenomenon in contemporary opera: a sellout and a knockout.

No surprise, though, that the most popular works in the repertoire are still Puccini: Tosca, notching up 422 performances in 60 years, and La Bohème in second place with 415. The challenge of keeping the most well-trodden operas fresh and new has inevitably had its ups and downs: the rise of the director as the dominant force in opera produced more than a few clashes over the years. Wagner's operas habitually attract the worst examples of this, and Bernard Haitink is said to have loathed one Ring cycle production so much that he almost refused to conduct it. Still, equally difficult moments occurred in Verdi: for instance, La Forza del Destino in 1962 directed by Sam Wanamaker, involving the projection of Goya illustrations above the stage, induced vociferous booing.

Apart from a handful of onstage clangers, the Royal Opera House's lows have been entirely political. The trouble underlying its trials and tribulations is the British system of arts funding: the UK's subsidised arts continually exist in a stressful climate of mend-and-make-do, hamstrung by a succession of well-intentioned but often impractical and unrealistic ideologies. And so to the biggest low in all the Royal Opera's 60 years: the financial and managerial meltdown that surrounded the years in which the house closed for refurbishment in 1996.

It was the culmination of a long period of deterioration during the cutbacks and starvation funding of the 1980s, in which the ROH had sunk into a physically dangerous state. The rebuilding in the late 1990s came not a moment too soon; though planned as early as 1984, it became possible only through money from National Lottery funds awarded 11 years later.

As if the place's physical condition wasn't bad enough, the full extent of the ROH's vituperative backstage atmosphere became public in 1995 when Jeremy Isaacs, the then chief executive, made a critical error of judgement: he allowed a fly-on-the-wall documentary crew access.

The House revealed on national TV the innards of the ROH at its thorny worst and plunged the struggling institution's morale, and the public's perception of it, to new depths. Isaacs resigned in 1996, a year early, frustrated at the lack of adequate subsidy; two subsequent chief executives arrived and departed in rapid succession. In 1997, Verdi's Macbeth, the final production before the refurbishment closure, was cancelled, losing the house £200,000. A loan organised by a wealthy board member, Vivienne Duffield, helped to avert insolvency, before a government select committee report declared: "We would prefer to see the house run by a philistine with the requisite financial acumen than by the succession of opera and ballet lovers who have brought a great and valuable institution to its knees." The entire board duly resigned.

Yet, after a spate of more resignations, new appointments and new resignations, there has risen a Royal Opera House with a new look, a new attitude and state-of-the-art technical capabilities, since the house reopened in 1999. Admittedly, the theatre itself was a missed opportunity. Instead of taking the chance to create a new, improved auditorium, the old Victorian theatre was reconstructed to identical design, with acoustical improvements.

But today, the place is breaking even and for every pound of government subsidy, it raises two. Outreach and accessibility sit cheek by jowl with the main stage performances, and its activities in fostering new talent and educational work make it clear that the ROH is supporting a living, changing art. Ticket prices at the ROH are still no joke, yet the theatre is constantly filled to capacity, with audiences listening here to the starry likes of Angela Gheorghiu, Juan Diego Florez and the magical young tenor Jonas Kaufmann.

How long this can continue is another matter. The 2012 Olympic Games is slated to siphon off government funds from the arts, and London's arts organisations in particular are bracing themselves for likely new austerity measures.

The ROH still relies heavily on subsidy: last year, its grant accounted for £24.9m out of a total income of £80.2m. And so the Royal Opera's diamond jubilee may be a fitting occasion to draw attention to the spiritually nourishing power of music and drama; to welcome efforts to carry it to as wide a public as possible; and to enjoy the fruits of all that hard-won artistry while it's still possible to do so.