'I was angry when I was a child and I realised there was no God. It was in Assembly; we were all singing away and suddenly I absolutely knew for certain that it was all lies and people were deceiving themselves. As God went together with the Royal Family, I was frightened that people believed in it all, the whole package, and I must be the only one with these feelings. It was a moment of revelation, but at the same time it would have been wicked ever to mention it.

'It also had to do with being taught about infinity, which I found mind-boggling. It made me feel we were all tiny, tiny specks: and if I was, then they - the Royal Family - were, too. When you hear the word 'subjects' and find out what 'to subject' yourself means, it diminishes us all. It means you're nothing. It's so demeaning. But in those days it was unthinkable ever to criticise the Royal Family.'

Those precocious revelations (in the late Fifties, she thinks, so she would have been about 12) were the germ of Sue Townsend's new book, The Queen and I, an angry and astonishingly timely satire. It relates what happens when a Republican Party comes to power and the Queen and her family are rehoused on a council estate in the Midlands. Their attempts to adjust to a savagely diminished standard of living are related in cool, controlled prose, both witty and merciless. Here is the Queen's first morning in Hell Close:

'There was no hot water in the icy bathroom, so she washed in cold . . . How very awkward it was to dress oneself, how fiddly buttons were] Why did zips stick so? How on earth did one choose what went with what? She thought of the corridors lined with closets where her clothes used to hang in colour-co- ordinated rows. She missed the deft fingers of her dresser fastening her brassiere. How did other women cope with those hooks and eyes? One needed to be a contortionist to bring the two together without assistance. When the Queen was dressed, she had a terrific sense of achievement. She wanted to tell somebody . . .'

Sue Townsend is the eldest of three daughters. Her parents were bus conductors in Leicester, where she still lives. She left school aged 15 with no qualifications ('In most of my lessons I felt worthless and stupid'). She married at 18. By the time she was 25 she had three children, and her husband had left her. At 40 she was a multi-millionairess.

Let us try to do the sums. Adrian Mole, in his various manifestations, has sold - she reckons - seven million copies. His Diary was the top-selling book of the Eighties, outperforming Hips and Thighs and Kane and Abel. Say she makes an average of 40p on each paperback copy (she will have earned less on the first 10,000 hardbacks, and probably rather more on every paperback copy after the first 50,000). To round it all up, assume seven million 40ps, which comes to pounds 2.8m. Add another pounds 2m for foreign rights and sales (it has been translated into Japanese and Serbo-Croat and all languages between) plus all the usual spin-offs such as serialisation and follow-ups. Take away 10 per cent agent's fee, plus appropriate taxation, and Sue Townsend has still cleared at least pounds 2.5m, probably a good deal more.

She is modest, direct and unassuming, but it would be a mistake to imagine that she struck lucky, found the right formula, and lo] millions dropped into her lap. It would be a mistake to underestimate her in any way. Her success was no fluke. She had worked in secret for many years, writing and discarding tens of thousands of words. ('The stuff wasn't good enough. I wanted to write like Dostoevsky.')

The Queen and I shows evidence of meticulous research, without being overloaded with detail. 'I read lots of cringingly horrible sycophantic books about the Royal Family, especially old books from car boot sales. I read all about her clothes and her jewellery, even though I used hardly any of it. That fact that Britannia costs pounds 30,000 a day to maintain shocked me most, so I did keep that in, but very little else. And Philip's sisters married serving German officers but it was never spoken of. He bored me, so I made him a bed-ridden depressive in the book. He strikes me as a very one-dimensional man who doesn't like to admit that he's supported by his wife. There's so much to come out about Philip.' She looks wistful. 'But I just dropped a few hints. Kitty Kelley's doing his biography. That'll tell it all. Up till now he's been too close to the Queen, but I think even that taboo is cracking.

'I know I'm going to have to defend myself against people who think the book is disrespectful. The sky's going to fall in on me because I'm the person who killed off the Queen Mum.'

'The vicar stood at the Queen Mother's bedside and muttered inaudibly about heaven and hell and sin and love. The Queen Mother opened her eyes and said, 'I didn't want to marry him, you know. He had to ask me three times, I was in love with somebody else]' She closed her eyes again.

Margaret said, 'She doesn't know what she's saying; she adored Daddy.' '

If diligent research enables Sue Townsend to write convincingly about the Royal Family, it is from personal experience that she draws details of life on the council estate. She has been so broke that she had to walk to the offices of the DSS and beg for money to feed her children over the weekend - and was denied it, an experience she recounted with rage in a 1989 Chatto CounterBlast about the Welfare State called Mr Bevan's Dream. She knows the compromises, the accommodations, the lies and pride and shame and squalor at the bottom of the social pile.

'I've worked on estates like Hell Close as an adventure playground worker and as a community worker on a tower block estate, and the most important thing I learnt is that people can be both good and wicked at the same time. On the very worst estates there are people who are . . .' she pauses and searches for a word, lighting yet another cigarette as she does so, '. . . central characters. They can lay out a body or deliver a baby. They don't get honoured by anybody, but they're unofficial saints. They are usually women, though sometimes men, and they lift the community.

'Yet nowadays, even some of the most central rules - like, you don't shit on your own patch - have broken down. The young have started to steal from their neighbours. A lot of them aren't working, and it's not possible to live on pounds 30 a week and look presentable and keep yourself open to the possibility of getting a job. So there's a huge underground economy in which people clean windows for cash and flog stuff in pubs. Society is being massively criminalised. People in work do it too: the builder who wants to be paid cash-in-hand so as to avoid VAT. But the poor are more visible, so they're easier to find. You read of women on family support who clean a few evenings a week to make extra quid, and get prosecuted for earning illegally. I really am angry with the Conservatives for criminalising the country. It's so easy to pontificate, so hard to live life at the bottom.'

Townsend has always crossed the class divide by being impossible to pigeonhole. 'People I've known for ever always considered that I spoke differently. None of our family used Leicester dialect, though the accent is always there - I say 'buth' and 'coop' for bath and cup - but I've always loved using words, just as I love writing words, making the shapes. I love to use an inky pen and nice smooth paper. I think in sentences, and did so as a child, but I learnt to keep it to myself because it used to alarm people, especially my friends. Books always were, and still are, my passion.'

This is obvious the moment one enters her house. Every room is piled high with books: not, on the whole, new, but second-hand books, jumble sale books, grubby- paged and random books. She reads for two or three hours every day. My eye lights upon John Updike's Rabbit at Rest and I ask what she thought of it. 'It's a great, great book. He's the most incredibly truthful writer, and he makes the domestic grand and full of majesty.' What an amazing way to describe Updike: tender and accurate and original.

Her house in a leafy Leicester suburb is Edwardian; larger than it looks from the road, with four spacious downstairs rooms including a vast kitchen piled with the debris of the family's holiday washing; homely and ramshackle and welcoming. Every room is a temple to bric-a-brac, as though she had bought everything from every Oxfam catalogue. There are hand-made wall hangings and indeterminate pottery containers; miniature Easter Island statues and china ladies in crinolines, painted Russian wine glasses and olde worlde cottages; children's drawings and messages and photographs and reproductions of paintings by Crivelli and Raphael. The furniture is old without being antique. The floors are covered with astounding rugs. In her study is a Bakhtiari garden carpet worth several thousand pounds.

Unprompted, she offers me lunch, and presses gooey pastries on me afterwards, insisting that since she was diagnosed diabetic all her visitors eat the cakes she is now forbidden. I squelch through a chocolate eclair, and she averts her eyes. She smokes, guiltily. From her study the noise of children shrieking in a nearby playground can clearly be heard. She lives in comfort, but it isn't luxury and it certainly isn't seclusion. Nor has she bought a house in some foreign countryside. Sue Townsend has stayed very close to her Leicester roots.

Her clothes are classless, too. She wears a white (brand-new) T- shirt and jeans (very well cut) and pretty lavender suede flat shoes with gilt teddies dancing across the front. Her hair is a bit too careful and her figure a bit too trim for the average Leicester mum in her mid-forties, but other than that she would probably still pass unnoticed in the launderette. She shows less evidence of enormous riches than I would have thought possible. One drawback of fame is the number of letters she receives from strangers. With the help of her sister, Kate, who acts as her secretary, she answers them all.

'When the first Mole book was published in 1982, nobody thought it would sell. When I found they were going to print 3,000 copies in hardback I rang up my editor and asked him not to do so many. I could see my friends laughing at it in the remaindered bins. But Methuen are very good on humour and my editor likes dealing with rank outsiders and he thought it would make a lot of people laugh - but not seven million.

'When I started the first Mole I was divorced and responsible for three children. After I left school I'd worked in a garage serving petrol - I loved that because I could read between customers; in a dress shop; I'd even sold encyclopaedias, to my great shame. I did anything that was unskilled - selling hot dogs - anything. It was all so free then] You could walk out of a job at lunchtime and into another that same afternoon.'

She went on a playwriting course in her spare time from being a playgroup organiser, and started to write plays at the end of the Seventies. Her first was picked up by an agent called Janet Fillingham. 'She used to make a progress round the British Isles looking for new writers. She wrote to me and said, 'I would like to represent you.' That was such a thrilling moment] Mole began as a play on Radio 4 and after that the publishers asked me to write it as a book.'

Was that the decisive moment in her life? 'The most decisive thing I've ever done I think was not to do with work, but falling in love. I was convinced I was right, against all the odds; absolutely convinced that I wanted to live with him for the rest of my life. I wasn't married but he was, so I resisted it, in the sense that I kept away from him. I thought it might fade. I didn't do anything at all to engineer a meeting or have any contact with him. I had never spoken to him, but I'd been in love with him for a year before he asked me to go out on a date.

'I was working on the adventure playground at the time and he hadn't thought about me or particularly noticed me, and he still doesn't know why he drove across Leicester to the other side of town to ask me for a drink. It was extraordinary, and I still think it's extraordinary: to have one date, and to know this is it. That was 17 years ago, and we've been together ever since. I'm very pleased to say that his wife is now extremely happily remarried.

'He and I are very different people. I can only think there was something in him that I responded to on an extremely primitive level. To me he's good-looking, but he isn't conventionally good-looking. He builds canoes. But there's just something in him that I immediately fell for. He 'fits his skin', as the French say; he appears totally at ease with himself. He's incapable of artifice.'

Their daughter, Elizabeth, was born in 1977 but Sue and Colin did not marry until 1986, after Sue had suffered, and recovered from, a heart attack. That brought her face to face with mortality. 'It's quite a good thing to come close to your own death; you think, 'My God, that was a near thing]' So we decided not to hang about, but to get married.

'Of course, with four children and now three grandchildren, we have our ups and downs, but I have managed to detach myself a bit from the children and I think when that process is finished we'll be even happier. You never stop caring about them and thinking about them, but I force myself to accept that they are grown up and must make their own decisions. It's so tempting to say, for God's sake pay your car tax before you buy that leather coat or whatever, but I try not to.

'If I come home and Colin's car isn't outside it's like a blow. I just long to see him. I do think this is extremely rare - I wish it weren't. I make a point of saying to myself, 'I'm happy'. I think you should recognise it while it's actually happening, not just in retrospect.'

So what word would she use to describe her relationship with Colin now? She searches for the exact word. 'Passion,' she says.

(Photograph omitted)