The elegant half-moon hall of St Andrew’s and St George’s West is no stranger to controversy. The Edinburgh church was the wellspring of 1843 Disruption, when the Rev Dr David Welsh read out his theological protest to a vast congregation then marched out to join the founders of the Free Kirk.

Last Monday the pews were filled again, but the heated debate was centred on more earthly matters — the architectural integrity of Scotland’s capital. Three hundred or more gathered to vent their anger and fears for the future of the Royal High School. This magnificent monument to the city’s Enlightenment is under threat from developers set on trebling its size and converting it into a six-star arts hotel.

They propose massive modernist wings on either side of a neoclassical jewel, the equivalent of “putting Mickey Mouse ears on the Mona Lisa”, as one man put it to thunderous applause.

How then, did the designs for a building on one of Edinburgh’s most sacrosanct sites come to be approved in the first place? Why did the council allow such an unsuitable plan to emerge, despite the concerns of its planning department? And why, in a city of great architecture, was this egregious privatisation of the building the only plan to emerge for a historic, public site?

The answer lies in a grim truth about Edinburgh and its built environment: the key decisions that shape the city these days are taken, not by its civic planners, but by commercial developers.

Time was when the great names of Edinburgh’s architectural heritage resounded across the city: Robert Adam, William Playfair, Thomas Craig, Alexander “Greek” Thomson, Robert Lorimer and their 17th-century predecessors, shaped the city as we know it.

Today, the key decisions are made by companies whose names will mean little or nothing to most of Edinburgh’s citizens, and whose executives rarely if ever appear in public: Duddingston House Properties, Artisan Real Estate Investors, Standard Life Investments and Peveril Securities, Henderson Global Investors, Redefine International. All have been driving property developments that will significantly alter the face of the city centre, but who remain unaccountable in public. They produce buildings whose merits are measured by price per square foot rather than aesthetic beauty.

The phrase used in the profession is “development-led”. It means that many of the plans, including that for the Royal High School, originate, not with city planners, but with developers who negotiate with the council’s finance department.

Meanwhile the planning department, which should by rights be in control, has been cut to the bone, and has little design expertise of its own; rather than shaping the city, its critics say it can only respond to commercial plans. Far from ensuring that the architectural integrity of a great city is kept, the planners find themselves in the developers’ hands.

Last year, when plans for the Caltongate site, adjoining the Old Town, were revived, statements of intent came either from the developers — Artisan Real Estate Investors — or the council’s economic development department. Jobs, office space, hotels and luxury apartments were included, but no mention was made of architectural quality.

To emphasise that this was no one-off scheme, Frank Ross, the city’s economy convener, said that 34 more development sites were under consideration. “We are working closely with developers and potential investors to identify deliverable opportunities,” he said. “As we continue to engage with developers and investors . . . we fully expect further sites to come forward for inclusion. At present, 34 development sites are being considered, taking into account economic factors such as potential for job creation, GVA (gross value added) impact, location and deliverability.”

Robert Adam would be turning in his grave.

Of course, what is happening in Edinburgh is not unique. This week a hard-hitting newspaper article criticised the rampant expansion of high-rise office developments in London, describing them as “a set of improbable sex toys, poking gormlessly into the sky”. Ian Martin, an architecture critic, claimed that the deregulation of the 1980s had finally finished off the tradition of local authority architects.

“From now on, space and air would be shaped and primped by the private sector,” he wrote. “Architecture was redefined: no longer frozen music, but petrified Thatcherism. The client’s brief was to choke as much value out of a site as possible.”

Far from acting as a brake on unsuitable developments, the council seems to encourage them. An office and retail development in St Andrew Square by Standard Life Investments and Peveril Securities, which has grown considerably since the initial plans, was achieved only once three B-listed buildings had been demolished, in apparent breach of EU regulations.

The new building has been described by David Black, a veteran campaigner against planning decisions in the city, as one “which should by no stretch of the imagination be foisted on one of the world’s great historic cities”.

Such activity could endanger Edinburgh’s status as a Unesco World Heritage Centre. Next month Mr Black will present a dossier to the UN Board of Auditors in New York, which has a duty of oversight over Unesco’s activities and conduct, urging them to investigate whether WHC conditions have been breached. “Does Unesco approve of the legally questionable destruction of historic buildings in Edinburgh’s World Heritage Site?” he asks.

Events in the city have drawn attention from some of Britain’s leading architectural commentators. Gavin Stamp, the writer and historian, said: “Cities must change, but in a precious creation like Edinburgh some things — many things — must be sacrosanct. The new buildings that have gone — and are still going — up are mostly pretentiously mediocre, unsympathetic in colour, scale and rhythm, failing to respond to the thrillingly bleak and grey character of the historic city.”

In a country where government aspires to political independence, we might have expected more. Edinburgh should be the showpiece capital. Instead, Scotland’s sometime beacon of enlightened self-confidence is being dimmed. Deyan Sudjic, who was director of The Glasgow UK City of Architecture and Design programme in 1999, argues that Edinburgh lacks the architectural culture it once had. “Is this a uniquely Edinburgh phenomenon?” he asked. “I don’t think so, there are forces at work that you can see elsewhere. The new onslaught on St Andrews Square is a distant echo of central London’s obliteration of almost every trace of its 1960s architecture. But the point of devolution, or even independence, is to strengthen a sense of identity that in urban terms is powerfully expressed in architecture. Walking around Edinburgh today, you see instead parochial expedient philistinism . . . ”

Charles Jencks, who designed the Landform installation outside the Scottish National Gallery of Modern Art, accuses the planners of a collective failure of nerve. He added: “Architecture is not likely to be had on the quick, cheap and easy, any more than Rome was built in a day.”

At the city chambers, planning officials find themselves caught between the competing claims of a newly invigorated heritage lobby, and the demands of acquisitive developers, nurtured by its own economic development department, and the Scottish government. Councillor Ian Perry, the city’s planning convener, admitted that there was a presumption for development laid by national regulations, but said his committee was sensitive to the “universal value” underpinning Edinburgh’s world heritage status.

Mr Perry said: “There is an assumption that we will promote the growth of Edinburgh’s economy. However, we would be stupid to damage Edinburgh’s World Heritage status. That one factor brings in more wealth than any single development. If a project undermines the universal value, its benefit would be negated by the economic damage.”

The Royal High School plans are likely to be submitted this autumn. Sir Sean Connery once offered sage advice to the city fathers: “Those who now administer and plan developments in what they claim to be the Athens of the North might stop and ponder the oath taken by the Athenians of Ancient Greece: ‘I will leave my city not less but greater and better than I found it’.”