The biggest takeaway in the Singapore Grand Prix was not Max Verstappen’s impending championship success but allegations that his team, Red Bull, may have overspended under Formula One’s new budget cap. last year. The story has divided F1’s paddle, with Red Bull team principal Christian Horner adamant that the accounts his team submitted in March fall below the budget limit and comply with FIA financial regulations.
Aston Martin is also tipped to overshoot in 2021, but again the news is fueled by whispers in the herd, with official findings from the FIA due to be released only this Wednesday. when certificates of compliance will be issued to teams that met last year’s cap.
If it is found that a team overspended last year, it will conduct a process to determine a form of sanction, which can range from financial penalties to, in the most severe cases , excluding or suspending the world championships.
Why does F1 have a budget limit?
F1 has always been a sport of vast inequalities. From wind tunnels at factories to wheel guns in tunnels, there is huge variation in the equipment each team uses, which invariably leads to a huge difference in performance on the track.
To level the playing field and avoid big brands spending their way to success, F1 and the FIA have introduced a budget cap for 2021 in the hope that it will level the playing field by emphasizing sustainability. each team’s ingenuity rather than the depth of their pockets. Prior to the budget cap, the top teams spent in excess of $400 million, and although the cap doesn’t cover everything, the factors that directly influence car growth are currently checked.
For the first season of the cap last year, it was set at $145 million, and this year it has dropped to $140 million, although that number has since been changed to compensate for increased inflation. this year and additional races and sprint races. Next year, the target will be set at $135 million, though that figure will also be adjusted to accommodate inflation and additional races.
What do we know so far?
Probably not as much as some headlines last weekend suggested. For weeks, even months, there have been rumors that certain teams may have gone over budget limits, but until the FIA releases its certificate of compliance on Wednesday, we won’t know for sure. sure. The process of auditing team accounts is supposed to be confidential, which is one of the reasons Horner is so angry when opponents accuse his team of overspending.
The groups filed their accounts in March, which means more than six months of audits by the FIA. That process has been closely worked out with the teams, and in recent weeks is in the final stages of testing, meaning any team that may have overeat will be able to know they can enjoy it. a penalty kick.
Even with additional explanations of what’s been below the budget cap since March, Horner said Red Bull is “significantly lower, and with clarifications, we should even stay below”.
“We weren’t told we were breaking the rules, so let’s go to the end of the process and see where we are,” he added.
However, both Mercedes boss Toto Wolff and Ferrari sporting director Laurent Mekies said in Singapore that it was an “open secret” that two teams breached budget limits last year – one by a small amount and the other by a larger amount. Those comments have been supported by several sources in the table of contents, but for many there is still a wait-and-see approach to Wednesday’s news from the FIA.
It is widely agreed that if a violation has occurred, it should be taken seriously.
How can a group gain a huge advantage when it comes to overspending?
This is the main reason that accusations at Red Bull have become such a controversial issue. The top three teams – Mercedes, Red Bull and Ferrari – were forced to cut their budgets last year, including redundancies, cutting time on vehicle development this year and significantly reducing spare parts. that they produce.
Even spending in excess of $7 million, which is still considered a “minor” breach under financial regulations, can have a significant impact on performance.
“Seven million people would be like 70 engineers,” said Ferrari’s Mekies. “70 engineers, they’re going to give you some serious time. That’s an example. So if you think about the power these regulations have, these Financial Regulations have, it can overwhelm both the Specifications and the sports time if you think about the amount of time flowing those numbers.”
Wolff also questioned what a “small” breach would look like.
“I think the word is probably incorrect, because if you spend an extra $5 million and still make a small infraction, it will still have a big impact on the championship,” said the Mercedes team boss. “We obviously keep a close eye on what parts are being put on the track by the top teams in each race in the 2021 and 2022 seasons, and we can see that there are two top teams on equal footing. and another team spends more money.
“We know exactly that we’re spending $3.5 million on the parts that we bring to the car, and then you can say what another $500,000 spend would look like – that would be We didn’t manufacture lightweight parts for the car to bring us down from double digit overweight because we simply didn’t have the money, so we needed to. That’s for next year’s car We can’t just take a lightweight chassis and put it in because it’s going to be $2 million that we’re over the limit.
“So you can see that every more spend has a performance advantage.”
Furthermore, last year’s budget was split in two directions as it affects not only the performance of 2021 cars but also 2022 cars. New regulations this year mean that there will be very little implementation from 2021 to 2022 and all teams have to start from scratch with brand new aerodynamic concepts. A good start on the latest generation of F1 cars will be a key factor in the success of the new era of F1 and the favorable start offered by the additional cost in 2021 can be felt in the future. next few seasons.
What penalties are there?
That depends on how many teams have overspent. The regulations outline two types of violations: “minor” and “serious,” and they come with slightly different penalties. Spending less than 5% ($7.25 million for 2021) is a “minor” violation, while spending in excess of 5% is a “material” violation.
The penalties for each person are listed in the financial regulations and include public reprimands, point deductions (for both builders and drivers), exclusion or suspension from championship stages. , limiting the possibility of future aerodynamic testing and reducing the cost cap for the following year. However, “material” sports penalties also include the possibility of exclusion and suspension of championships.
How will the penalty be decided?
If it is a minor breach, the group in question can sign an “acceptable breach agreement” with the FIA’s cost cap regulator. Basically, the FIA will propose a penalty to the team, which in turn will have to accept and comply with. The details of the agreement will be made public for the sake of transparency, but omit any confidential information related to the group’s accounts.
If a serious violation is discovered or the team disagrees with the terms of an accepted breach agreement, the sanction process will be referred to the cost-limited arbitration panel. The panel consists of six to 12 judges, who are elected in their positions by the FIA general assembly. Referees can come from legal and accounting backgrounds and can be nominated by FIA sports members or a group of five F1 teams with the overall backing of one candidate.
Decisions made by the cost-limiting arbitration panel can be appealed in the FIA’s International Court of Appeals, meaning a final outcome can take weeks or even months if it is rejected. dispute.
Why is this such an important issue in F1?
This is a huge test for the new era of F1. The FIA’s financial regulations were put in place to make the sport fairer among all ten teams, so if a team can break it and not face a significant penalty, it flies. according to what they are trying to achieve.
Last year’s championship battle between Lewis Hamilton and Max Verstappen underscored how tight the odds of winning in F1 are, so even a very small outlay can make a big difference. It’s also difficult to determine how big of an advantage a team can gain by overspending then snowballing into next year’s car development and affecting the outcome of subsequent championships. .
Transparency is also a key factor in the outcome of the evaluation process. If a team can exceed the cost cap by finding a way around financial regulations, there is a real risk that the sport will become an accounting championship rather than a technical one. It doesn’t matter how brilliant a team’s design office is as long as a competitor can find holes in the way they account for spending elsewhere and pump more money into car development. That makes it all the more important that the FIA give a fair but firm penalty to any team that exceeds the cost limit. If not, why not accept the one-year penalty to ensure further success?
All ten groups agreed to the terms of the cost cap when it was drawn up and participated in the formulation of the financial regulations that govern it. In theory, there should be no excuses if one or more of them are found guilty of exceeding that, but don’t expect matters to be carpeted regardless of Wednesday’s outcome.
