Edinburgh's arts crown may slip as £2.5 million cut looms

A new report revealed grants for "third party services" will be slashed by more than ten per cent as part of the efforts to battle a 90m black hole.

Council chiefs are expected to draw up full details of where the axe will fall, with the cuts being spread over the next two years.

The warning has led to fears that a lack of financial investment could lead to Edinburgh losing its crown as the world's biggest arts festival.

Councillor Gordon Munro, culture and leisure spokesman for the Labour group on the council, said: "The change in funding will make Edinburgh less fun and more vulnerable to the other cities that have looked at Edinburgh with envy.

"There needs to be a serious look at the contribution Edinburgh makes to the tourist draw of Scotland.

"Edinburgh makes a disproportionate contribution and that needs to be recognised by the Scottish Government."

In the current financial year, the city council awarded 20.6m of grants to "third party services", which was 1m less than last year. The grants included 4.1m of funds awarded to the city's festivals, as well as 478,270 of grants to the Queen's Hall and Royal Lyceum.

Festival bosses are currently working with the private sector to look at ways of raising funds to make up any shortfalls.

The Evening News revealed last week that options being considered include a voluntary "festival tax" that could raise millions of pounds a year.

A spokeswoman for Festivals Edinburgh, the umbrella group for all of the festivals, said she did not want to comment until full details of cuts are received.

In a report, the council's director of corporate services, Jim Inch, warns that organisations who currently receive Fairer Scotland funding - which will no longer be ring-fenced - could see cuts well in excess of four per cent in 2011-12.

Council leader Jenny Dawe warned: "The financial pressures the council will come under mean that we have to look at absolutely every area."