The Heavenly Planet Festival would have been free to the public, funded by joint organisers Festival Republic, Reading Borough Council and festival director Thomas Brooman.
But a statement said Brooman is "unable to commit to funding the event on the basis that had been agreed and has pulled out".
"People everywhere are tightening their belts and making savings and we are no different. Through no fault of his own, Thomas was no longer able to make the equal financial commitment necessary," said Reading Borough Council lead councillor for culture and sport Graeme Hoskin.
"While this is unfortunate, as a council we do not feel we can commit any more public money to cover the additional costs that are now needed."
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