NS Profile - Hay-on-Wye

It is the annual, unmissable literati event. But behind the scenes, you'll find control freaks, pett

Stratford has Shakespeare, Glyndebourne has opera, Hay-on-Wye has books - and its very own literary festival. Perched at the foot of the Black Mountains, the tiny market town of Hay boasts 39 bookshops, two million books and a population of just 1,200. And for ten days each year, the town hosts its very own "Woodstock of the mind", as Bill Clinton dubbed it last year. It regularly attracts some 50,000 book-lovers from across the UK, Europe and the US. Well, that at least is the official blurb.

Reading between the lines, a different story emerges, which involves a literary Taffia mafia, sponsorship rows and a festival director , Peter Florence, who is said to preside over the event as if it were hisown personal domain. Some are now wondering whether Hay has become a victim of its own success.

When the festival was launched in 1988 by Florence's father, it was always intended to be a small affair. Only 1,200 people turned up, the budget was £23,000 and there were just 35 readings, platform talks and performances. Spaces were begged and borrowed and authors got paid in cases of claret.

"Hay-on-Wye?" Arthur Miller retorted, when invited to attend the festival's second birthday. "Is that some kind of a sandwich?" But against all the odds, it succeeded. "A ludicrous idea that worked" is how Florence described it. By 1997, the budget had swollen to £350,000 , there were 163 events and an audience of 35,000. (Though Peter Florence has kept the festival's all-in-the-family flavour: his wife, Becky, is at his side throughout, and his mother-in-law, Rhoda Lewis, sits on the board of directors. )

This year's festival, due to unfortunate timing, has been eclipsed by the Queen's jubilee and the World Cup. It has also been overshadowed by an ugly disagreement over corporate sponsorship. Although big names like Fay Weldon, Ian McEwan and Francis Fukuyama were scheduled to appear at the event, Germaine Greer and Jim Crace cancelled their appearances in protest at the involvement of Nestle as a venue sponsor. Their unease about the company's marketing of powdered milk in the developing world is shared by fellow authors. Will Self is staying away from Hay, and urging all "self-respecting writers" to do the same. Ironically, the Guardian, which is the festival's new title sponsor, used to give extensive publicity to the charity Baby Milk Action's anti-Nestle campaign but has since moderated its stance. Florence has done himself no favours by dismissing the controversy as a personal matter for Greer. And his adoring bevy of beautiful female assistants, all miked up like roadies, make the apparatchiks at Millbank look like models of probity. When an inquiry was made to the Hay office about the reasons for Greer's withdrawal, one journalist was told that her absence was due to a bereavement. Not even literary festivals, it seems, are immune to control-freakery and the art of spin.

For many book-lovers and festival habitues, the row over Nestle is typical of the new-look Hay. In their eyes, Peter Florence has attracted lucrative business - at a cost to the festival's distinctively amateurish, jumble-sale identity. Bill Clinton banked £100,000 for his speech last year, which raised hackles among the local community. Other celebrities who jumped on the Hay-wagon in 2001 were Van Morrison, the rock group Pulp and Sir Paul McCartney, none of whom could be said to form the vanguard of a literary movement. True, money pours into the area's restaurants, bookshops , hotels and shops over the ten-day period, but it is questionable how much the local community at large benefits.

Accusations of metropolitan cliquishness are difficult to dispel, especially when Lord Bingham of Cornhill, the former lord chief justice, is the festival president, and Revel Guest is chair of the board. Both own country houses in the area, and vie with each other to hold parties from which smaller fish down the literary food chain are ruthlessly expunged. There was dancing at Revel Guest's on 1 June; and, at the following night's Guardian bash, everyone celebrated what apparently was a first: no one could recall being at a party where Alan Rusbridger had served champagne.

Hoping to outshine them all is the sponsor Orange: its big bash will be held on the closing weekend, but throughout the festival it has maintained a high profile, thanks to a proliferation of marquees. There is a huge tent called the Orange Relax Zone, with its own chill-out room, and a separate Orange Body Zone, where you can get 15 minutes of reflexology for £8 (for £30 you can get an hour). An ironic antidote to the rampant commercialism?

Together with the commercialism, there are some who point to a rather odd modus operandi at Hay. Toby Young, a writer not normally known for turning down invitations, has become the latest to withdraw from Hay, after discovering his name in the programme as a speaker without ever having agreed to speak.

"The first I heard that I was appearing at Hay was when I received a letter in the post thanking me for agreeing to do it," says Young, author of How to Lose Friends and Alienate People. "The letter was signed by Clare Purcell, the festival officer, so I called her to find out what was going on. She laughed like a hyena and said it was absolutely typical of the way Peter Florence puts people's names in the programme without consulting them - and then hopes for the best. I would have thought at least 50 per cent of the people listed in the programme aren't going to be there. I imagine there'll be a lot of disappointed Guardian readers asking for their money back."

Florence denies that any of this is true, and says he was told by Young's publishers that he had agreed to attend.

The seeds of disharmony were sown last year, when the festival jilted its faithful sponsors, the Sunday Times, in favour of the Guardian. Many suspected something was afoot when it was noted that the Guardian editor, Alan Rusbridger, was among the privileged few at the festival's gala dinner for the star guest Bill Clinton, while John Witherow, editor of the Sunday Times, was nowhere to be seen.

News International has been slow to forgive Florence. Insiders say he promised them a Clinton interview, but it never materialised. "It was held out to us as something that would happen," says one, "but it all backfired."

To be fair to the tirelessly ebullient Florence, he has as many supporters as detractors. He has kept the Hay show on the road, even if his attempt to repeat the formula in London a couple of years ago with the launch of the London Literary Festival, or The Word, met with mixed results. "Every borough had to be part of it and P D James was not best pleased with an audience of about three people who turned up to hear her in some obscure part of town," says one. Orange says that it has not decided whether it will be sponsoring this year's London Literary Festival, but it will make an announcement in the next couple of weeks.

"Of course, there is mild resentment from some writers at Hay who don't get paid," says a Florence ally. "But they do gain without realising it. Hay is a mixture of personal fiefdom and an international forum for literature. There is nothing quite like it. Cheltenham is dull. Brighton? Forget it. The Edinburgh International Book Festival is overshadowed by the Edinburgh Festival. Whatever you think about Florence, he has created the greatest festival in literature.The problem is that it is bigger than him now."

And that is one of his biggest fans speaking.

The author is diary editor of the London Evening Standard