Formula 1 is aiming to establish a 110 million Euro budget cap by the 2011 season. FIA consultant Tony Purcell has written to all the teams with the figures the governing body would like to be set as a starting point for future discussions, and they look like this: 175 million Euro for 2009, 140 million Euro for 2010 and 110 million Euro for 2011. 

This idea would happen to be Max Moseley’s brain child. The man has yet again been asked to stay away from a Grand Prix, none other than Monaco so I think it might be fair to say that his days as head of the FIA are well and truly numbered but this budget capping notion is one that is going to stick around, with or without him. 

So why has all of this come about in the first place? Well, the FIA had outlined plans to limit the use of wind tunnels and other aerodynamic development in a step to limit costs following a 10-year engine freeze. But Honda chiefs called for more unconventional regulations. Honda CEO Nick Fry had concerns for the spiralling costs within F1 teams. 

“What we see at the moment; if you look at the accounts of any of the UK teams, is that the costs keep going up. 

“So far, what we have been successfully doing is moving money from one area of the team to another. Money is certainly moved from engines to aerodynamics because that is the next best area of performance advantage. 

“We support a lot of the proposals on the aero restrictions, but the fear is that that money will merely be diverted elsewhere. It will go to driver salaries or engineer salaries, or some other part of the car, but will not necessarily reduce the total bill that a team has to pay. 

“So rather than chasing our tails, we think we should be considering an overall budget-cap. Although it will be difficult to monitor, we think it can be achieved.” 

Ross Brawn is in agreement and added, 

“We do support sensible efficiencies on cost and cost restraint. The difficult thing is applying it so it doesn’t advantage or disadvantage one team over another, that’s the thing we need to focus on. 

“The concept of a budget cap a couple of years ago was thought to be fairly ludicrous. But if you look at the weaknesses of the counter-arguments and alternative solutions, you wonder whether budget-capping isn’t the one you ought to find a solution for. It gives everyone the opportunity they want to try and achieve the objective.” 

Run it up the flag pole and see if it flies then? 

Apparently though, policing of the budget-capping is not considered to be the problem. Everyone is going to toe the line because F1 involves so many public companies and the risks to the main business of being seen to be caught cheating are such that no one will do it. There will be an element of self-policing as the movement of personnel between the teams means that any rule-bending will not remain a secret for long. Also, the FIA would have access to all public filings and might even work with the different tax authorities to ensure that the budgets stated to the FIA are the same as declarations made to tax authorities. You can’t cheat one without cheating the other and no one wants tax evasion investigations do they? 

The accountants are going to have some job on their hands. But even they are used to having to adhere to strict reporting regulations that have come along since the Enron Scandal. Enron lied about it’s profits and concealed debts so they didn’t show in the company’s accounts. The ramifications were far reaching in respect of how Enron managed to get away with it for as many years as it did. Hence, a huge crackdown on just how much an accountant is allowed to do without someone looking over their shoulder to ensure everything is all above board. So controlling what the number crunchers do apparently isn’t as complicated to control as you might think.    

My initial response to hearing about budget-capping was how in the world could the expenditure of a Formula 1 team possibly be monitored? Also, just how stringent will the limit be? I mean, what if a team’s accountant takes his eye off the ball, drops a zero in one column and over spends by a couple of hundred Euro; not a huge amount out of a budget worth over 100 million Euro. What would the consequences be on that? A fine? Hardly keeping expenditure down, is it? Team exclusion? One would presume not. Budget-capping, if I’ve got this right is designed to help the little people progress, or get other teams/manufacturers to join in the fun, get more cars on the grid and bring in more capital for Formula 1 World. Big penalties for getting it wrong due to heavily monitored rules and regulations hardly appears to be a positive move from where I’m sitting. But of course, as I have previously stated, the teams aren’t going to get it wrong. Fear of naming and shaming at the hand of cheating will ensure all accountants (salaries not included in the budget-cap I presume) employed by the public companies especially will ensure all the i’s are dotted and the t’s are crossed and not so much as a single cent will be over spent.   

But something else I have all ready mentioned is that Tony Purcell has written to all the teams with the figures as a starting point for future discussions. I am willing to bet there is plenty to be discussed, much of which is listed in the above paragraph. If this thing can be ironed out properly then there is no reason why this shouldn’t be a good thing for the sport. The teams who languish at the back of the grid do so mainly due to not having the funds that the top dogs have in order to stay at the front. We love to watch McLaren and Ferrari wrangle for the championship titles every season but imagine how exciting it would be if there were more teams fighting it out? Mind you, the more lucrative teams will still be able to entice in the better drivers. The budget-capping will not include the salaries for drivers or team bosses. In fact, budget-capping will also exclude expenditure on engines, Kinetic Energy Recovery Systems (KERS) or marketing costs. One wonders what they actually will spend their 110 million Euros on?

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