The deficit was incurred after the festival produced six new shows last year. Some costs are being recouped, however, as shows such as David Harrower's Blackbird are sold to other venues. The play, which explores pedophilia, recently moved to London's West End, earning rave reviews and the possibility of a transfer to Broadway.
Sir Brian McMaster, the festival's director, told the Scotsman that he was not alarmed by the debt, which the festival is not expecting funders to absorb, saying, "We are paid to have sleepless nights. There will be a festival in 2006 and 2007 and maybe one in 2069."
Another success was a production of Benjamin Britten's Curlew River, which has been sold to a European opera house and will be performed next year. Not so lucky were a controversial production of John Adams' Death of Klinghoffer and Three Thousand Troubled Threads, a play about Scotland's Chinese community, which can't find buyers.
Money recouped from sales of the productions will not figure in the festival's 2006 accounts. Organizers defended the new productions as giving the festival its creative edge and keeping the program innovative, especially in the face of competition from international summer festivals such as Aix-en-Provence and new U.K. festivals in Manchester, Liverpool and Birmingham.
The festival receives Ô£1.5 million from Edinburgh City Council and Ô£1.1 million from the Scottish Arts Council, but despite an extra Ô£600,000 from the Scottish Executive and the council its deficit increased last year.
The 2005 festival cost Ô£7.9 million but income, grants, and sponsorship fell about Ô£850,000 short, according to the Scotsman.