Controversy has surrounded the expansion of Edinburgh's Christmas market in Princes Street Gardens.

City council chiefs have signalled they want to scale back a controversial Christmas market in response to growing concerns about its rapid expansion and the amount of damage that is being caused.

They want a rethink of the number of market stalls, bars and fairground rides even if planners give the green light to extensive new infrastructure brought into the gardens last year by event producer Underbelly, despite not having planning permission.

In the event of councillors turning down the return of the so-called “space deck” in the gardens, crunch talks would be held with Underbelly over staging the Christmas and Hogmanay festivals in a totally different way this year.

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Edinburgh's winter festivals are said to be worth more than 150 million to the city's economy.

If those talks fail to find a solution, the council would then attempt to bring in a new operator to ensure the city’s Christmas and Hogmanay festivals go ahead in some form.

A report due to be published by the council today will signal a clampdown on the use of its parks for festivals and events.

It will state that is “essential” a proper balance is struck in future with the desire of some residents and visitors to use them for “peace and quiet.”

The options for the festivals have emerged after it was revealed that Underbelly had threatened to pull the plug on the two events on three separate occasions last year during tense negotiations about the market.

Critics claim the firm, which has an annual £800,000 contract with the council, has been allowed to act with “virtual impunity” in its running of them. It was awarded a two-year extension last summer by senior council officials, a decision councillors were kept in the dark about.

The council today signalled a shake-up of the way major events are handled in Edinburgh in the wake of a damning internal probe into the handling of the two festivals, which are worth an estimated £150 million to the economy.

The inquiry, led by council chief executive Andrew Kerr, exposed widespread flaws over the handling of “contentious decisions,” inconsistent handling of events, and communication failures within the council and a need for greater transparency with the public.

The internal overhaul will see councillors of all parties given more oversight and advance warning of major events in future due to their “reputation impact on the city.

Senior council officers will also be given responsibility for specific events to ensure “clarity of responsibility” and avoid “inconsistent messaging” to festival organisers in future.

Council leader Adam McVey said: “Residents want to know the council is listening and that specific concerns raised have been heard.

“We’ve already committed to consulting widely with the city on the future shape of our winter festivals and it’s important that this conversation is given the time it deserves.

It’s also important in the meantime that the ongoing planning process for the Christmas market under the existing contract is not undermined.

“However, we are setting out clear expectations as to how our winter festivals can be successfully sustained, while taking on board the views of all residents.”

Conservative councillor Phil Doggart said: "Cllr McVey’s only response to any problem is to to say that he is listening. Unfortunately, his administration would perform better for the city with a little more doing. His team has been asleep on duty when overseeing the winter festivals.

"His committee convenors have let officers do as they please, or they have been unaware of the consequences of unchallenged decisions. Both of these are unacceptable.

"The proposed solution for events appears to be the creation of a group of councillors meeting in secret, reporting to no-one. This only magnifies the culture of backroom unaccountable decision-making. It has to stop and stop now."