F1 budget cap debate explained: Punishments, decision date and more

Toto Wolff and Christian Horner have clashed over allegations that Red Bull breached spending cap rules, shining a spotlight on the regulations that were introduced by Formula 1 last year.

The Mercedes team principal said Red Bull are being investigated after Christian Horner remained adamant that Red Bull had not gone over the cost cap.

But what is the cost cap and how could it impact teams who breach the limit?

What is the F1 cost cap and why was it brought in?

Formula 1 installed the sport’s first-ever budget cap in 2021 in a bid to support a financially-sustainable sport, give more teams a chance of success and deliver a more competitive competition.

Initially, a limit of $175m was set for 2021, but the coronavirus pandemic accelerated the need for F1 to slash costs and that limit was reduced further.

How much is the cap?

Following a review in 2020, the cost cap was set at $145m for 2021, $140m for 2022 and $135m for 2023-2025, though the figures were based on a 21-race season and an inflation uplift was applied earlier this season.

The budget cap applies to money spent on car developments and performance, but not to some big-ticket items, such as drivers’ salaries, marketing costs, logistics, travel and legal costs.

How much were teams spending before?

The grid’s leading teams had been spending in excess of $200m per season before 2020.

Mercedes Team Principal Toto Wolff has claimed the rules required his team to reduce their spending by $50m and make 40 members of staff redundant. He also claims they are using used parts and have significantly reduced development in order to comply.

How is it being policed?

F1 has set up a Cost Cap Administration to ensure all teams are following the rules, and all 10 teams had to submit complete documentation for the 2021 season by March 31 this year.

If any team has fallen foul of the regulations, they will not be issued with a certificate of compliance and a Cost Cap Adjudication Panel – a group of independent judges – can impose a range of punishments.

Why are people saying Red Bull have broken the rules?

Reports in the Italian media this week have claimed Red Bull significantly overspent in 2021, but Sky Sports has been unable to verify those claims.

Wolff insists the issue is an « open secret » in the F1 paddock, telling Sky Sports on Friday: « All of us have been investigated diligently and, as far as we understand, there is a team is in minor breach, which is more procedural, and another team that is fundamentally massively over and that is still being looked after. That is an open secret in the paddock. »

However, Red Bull have reacted furiously to those comments, hinting at legal action against rival teams and insisting the claims are « fictitious ».

What else have Red Bull said?

In a compelling news conference on Saturday, team principal Christian Horner said the financial submission made to the FIA was confidential and there is no way rival teams could know what the outcome is – as Red Bull themselves haven’t been informed yet.

He also described it as « an underhand tactic » from Mercedes and Ferrari to distract from Max Verstappen’s performance on a weekend in which he could win the drivers’ championship.

He admitted the FIA contacted the team 10 days ago asking for some clarifications, but he maintained his belief that the team has been « fully complaint with the regulations ».

Have any other teams broken the rules?

Reports in the Italian media have suggested that Aston Martin may also be in breach of the 2021 cost cap.

Wolff has hinted that they may be in minor breach, with Red Bull guilty of a more serious breach.

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A number of team bosses have had their say on the cost cap row that emerged in the build-up to the Singapore Grand Prix.

What happens if a team only went over the cap by a little bit?

An overspend of less than five per cent would be considered a « minor » breach of the rules and would carry less severe penalties.

However, possible sanctions include the deduction of constructors’ and drivers’ championship points and a suspension from one or more stages of a competition.

However, other sanctions include limitations on the team’s ability to conduct aerodynamic or other testing, or a reduction in their overall cost cap going forward.

Wolff claims that minor breaches could allow teams to spend an extra £7m – and that if the penalties are light, then all teams would be willing to break the rules in future.

He says the benefits of overspending in one year would potentially boost teams in future years, and so it would be worth pushing the rules to the limit.

What happens if a team went over the cap by a lot?

If a team has overspent by more than five per cent, it would be regarded as a « major » or « material » breach and the punishments are likely to be harsher.

There is a possibility that constructors’ and drivers’ championship points could be deducted, or the team could be suspended or excluded from a championship completely. A reduction of a team’s cost cap is another potential sanction.

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Johnny Herbert says the F1 cost cap should not be changed mid-season and just has to be managed in the right way.

What are the FIA saying?

The FIA have insisted any breaches would be « dealt with » according to the regulations, but also insisted that the current speculation around Red Bull is « unsubstantiated ».

When do we expect a decision to be made?

It is expected that an official announcement on the teams who have complied with the cost cap will be made on Wednesday (October 5).

It is not clear when sanctions will be applied to any teams that are found to have overspent.

Could the rise in inflation and decline in the pound be an excuse for any guilty teams?

Earlier this season, several of the bigger teams called for an increase in the cost cap due to the cost-of-living crisis and associated inflation driving up costs and placing even further strain on team budgets.

In July, teams were permitted to overspend on the $140m limit by 3.1 per cent in 2022. No overspend has been allowed for the 2021 season.

The regulations also account for issues such as the recent collapse of the pound in the UK. A complex formula has been applied to ensure no teams can benefit from currency fluctuations.

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Christian Horner says Red Bull are confident they complied with the cost cap rules, and criticises ‘unacceptable’ comments from rival teams.

Could Max Verstappen really be stripped of his title last season?

Verstappen eventually won last season’s title by only eight points from Lewis Hamilton, so theoretically, any meaningful points deduction in last year’s drivers’ championship would likely see him drop below Hamilton in the standings.

However, nobody has openly called for such a punishment at this stage. Wolff described it as « unrealistic » and Sky Sports F1 pundit Martin Brundle says « it would be a nonsense to try to unravel all of that now ».

Could Verstappen and Red Bull be disqualified from winning this season’s title?

If Red Bull are found guilty of a material breach of the rules, then exclusion from this season’s championship is one of the potential punishments the panel could select.

Brundle insists any team in serious breach would need to take « a heavy penalty » but also suspects the current rumours could « fade to black. »

However, when the cost cap was announced in 2019, F1’s managing director Ross Brawn said: « This has teeth. If you fraudulently breach the financial regulations, you will be losing your championship. It has serious consequences if teams breach these regulations. »

We may find out in the next few days if such consequences need to be applied.