The excuse often made by such festivals is that authors will find their appearance "profile-raising" and will sell more as a result. As a commenter on the blog points out, try that one on your plumber and see how far you get. The caterers, electricians and other backroom people who enable these festivals to happen will all expect, quite rightly, to get paid and would not consider working otherwise. Yet authors, the raison d'etre of a literary festival, are with increasing frequency expected to donate their services. Quite often, too, and certainly in the case of this festival, there will be "guests of honour" who do get paid, presumably at the expense of those who don't (the year Bill Clinton appeared at Hay, he was rumoured to have been paid £10,000, while most of the writers present went home with a white rose.)
At least, though, Hay does, or then did, pay expenses. Actually expecting an author to be out of pocket by attending is a new one on me, but I suspect it may increase. Paul Magrs did the right thing by pulling out, but I really wish more writers would refuse to be treated in this way. I don't think writers should even agree to appear without a fee, unless for charity or at a festival to which entrance is not charged. It's demeaning and it's unprofessional.
It's also a dangerous precedent to set. Organisers may tell you: these are hard times, they can't afford to pay writers "at the moment" (the implication being that if your charity enables them to survive, things might get better in future). Well, if they can't afford to pay those who constitute the most important part of their festival, they had better by all means go out of business. And as for the future, let us not forget that once upon a time, young people who entered professions, especially in the media, got paid. These days, they are expected to work for nothing as "interns" and somehow keep themselves or be kept by wealthy London-based parents in the meantime. This disgraceful modern version of sweated labour has become the norm and it will be very hard to change it back. If authors let unpaid work become their norm, they may well find the same. Many non-authors have real difficulty understanding why writers want and deserve payment; I have heard people seriously suggest they should do it for love and that it somehow undermines their commitment to their art if they want to put food on the table as well. But such folk are romantic fools; festival organisers are not, or shouldn't be.
Some few lucky authors may be able to afford to appear for no fee (though I suspect they won't be the ones asked to do so). But they should refuse anyway, on principle and out of solidarity with their fellow-writers.