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FIA confirms £40 million budget cap for F1
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FIA confirms £40 million budget cap for F1
Posted By:   |  30 Apr 2009   |  11:08 am GMT  |  59 comments

The details of the Budget cap have been released by the FIA.

It will start next season. The level has been set at £40 million with no ‘glide path’ from a higher figure to a lower one. It will present teams with an obligation to lay off a significant number of people quickly, which in itself is an expensive exercise.

The FIA has maintained the idea of a two tier championship, with teams able to spend more if they wish to, but the cost controlled teams enjoying greater technical freedom. This will greatly annoy Ferrari and BMW.

The FIA statement reads as follows:
“From 2010, all teams will have the option to compete with cars built and operated within a stringent cost cap.
The cost cap for 2010 will be £40m per annum*. This figure will cover all team expenditure except:

- Marketing and hospitality;
- Remuneration for test or race drivers, including any young driver programmes;
- Fines or penalties imposed by the FIA;
- Engine costs (for 2010 only);
- Any expenditure which the team can demonstrate has no influence on its performance in the Championship
- Dividends (including any tax thereon) paid from profits relating to participation in the Championship.”

Drivers being excluded will drive up their wages. But these may fall under the budget cap in future years. Engines being excluded means an additional £5million for customer teams and allows the manufacturers some latitude in reshaping their engine departments. Many will be providing customer engines to teams.

The whole plan is aimed at attracting new teams to the series and the field has been increased to 26 cars, so 13 teams can get an entry. Bernie Ecclestone has agreed to give the new teams a share of the prize money (normally they would have to serve a couple of years before getting anything)

“In addition to the payments which it already makes to the top ten teams in the Championship, Formula One Management, the commercial rights holder, has agreed to offer participation fees and expenses to the new teams. This includes an annual payment of US$10 million to each team plus free transportation of two chassis and freight up to 10,000 kg in weight (not including the two chassis) as well as 20 air tickets (economy class) for each round trip for events held outside Europe.

“To be eligible for this, each new team must qualify as a “Constructor” and demonstrate that it has the necessary facilities, financial resources and technical competence to compete effectively in Formula One. ”

The technical freedoms the capped teams may enjoy are as follows:

“1. Movable wings, front and rear.
2. An engine which is not subject to a rev limit.

The teams will also be allowed unlimited out-of-season track testing with no restrictions on the scale and speed of wind tunnel testing. ”

To put pressure on the existing teams to comply , the FIA has said that entries must be in soon,

“Applications to compete in the 2010 FIA Formula One World Championship are to be submitted to the FIA during the period 22-29 May 2009. Teams must state in their application whether they wish to compete under cost-cap regulations. ”

The team’s association, FOTA is meeting in London on May 6th. Their response will be very interesting, with Ferrari particularly furious.

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59 Comments
  1. James says:

    Much like BMW and Ferrari, I was hoping and expecting the budget cap would be at £50million. That figure would still have been appealing to those potential teams that are serious about joining F1.

    I dont understand why the FIA couldnt use Force India as a model, who operate at around £50million with a relative degree of success.

    I hope this figure will increase…

  2. Gylen says:

    Interesting news.

    I’m curious though and perhaps you or some other readers will have a better idea than me:

    Will this actually limit the amount the teams spend or will we, in traditional F1 style, see some ‘creative’ financial decisions to get around the cap?

    For example, could a driver spend a portion of his huge wage on paying for the rest of the team’s salary etc. allowing his team to focus the rest on development/technology?

    Or will it be more stringently regulated than this by the FIA?

  3. mp4-19 says:

    LINKS

    hakkinen crash 1995 adelaide(notice the cockpit area please)
    http://www.youtube.com/watch?v=F1gqpQBkDuU

    ratzenberger crash 1994 san marino( head is exposed in the same way as hakkinen)
    http://www.youtube.com/watch?v=uK279uV8By0

    1996 cars( with drivers seated low in the cockpit)
    http://www.youtube.com/watch?v=pFsD9NElDa4

    so it took one more nearly “fatal accident” of mika hakkinen for Max Mosley to upgrade safety.
    Then how can one argue for Max being the reason why F1 is so safe?? The idiot delayed it by a year. i find it very disturbing that not many are aware of this particular fact. please compare the 94,95 & 96 cars & find the differences in the cockpit area for yourselves.
    you’ll notice only in ‘96 are the drivers seated low in the cockpit. what happened to senna could have happened to hakkinen, but for the timely medical attention of Sid Watkins.

  4. mp4-19 says:

    sorry for triple posting. but i urge all of you to see the above youtube links & comment.

  5. Neil says:

    This is ridiculous. MotoGP is bad enough with different classes of bikes riding around in different races, but it seems like we’re going to have a BTCC style “privateer” league in F1.

    We want to watch the best or nothing at all!

  6. Moog says:

    Does the budget cap exclude any money coming in? Such as the sales of engines from manufacturers to customers, prize money, merchandise, etc.

  7. martin says:

    I think the big teams need to accept this. It will be one of the most important developments to hit the sport ever and will maintain F1′s viability before it gets out of control.

  8. PaulL says:

    And refuelling is out for 2010 officially. Although strategy has it’s pluses, I think this could be good. There’s the possibility for genuine pace comparisons in-race, pitstop teams counting for more with the onus on fast tyre changes, slightly more incentive for passing with fuel strategy being unavailable (hopefully the winner-takes-all system will add to this), and even possibly the return of genuine qualifying with low fuel.

    Feel free to add your thoughts.

  9. A few things I can see there:

    (1) The budget cap includes FIA fines, so upset the FIA, and they will fine you out of the Championship (Maclaren???)

    (2) No word on the penalty for exceeding the budget cap – A fine? Exclusion from points? Expulsion from the Championship?

    On the other points in the press release which apply to *all* teams – budget cap or not…

    (3) With the removal of in-race refueeling, how do the three Qualifying sessions change? I presume that those cars in the Top-10 shootout session 3 will now be allowed to fill up with fuel before the start of the Race?

    (4) I can’t see the Drivers being too happy about the lack of tyre warmers/blankets during a race – I would guess it makes the cars a little loose for the first few laps, especially if they are heavy with larger fuel tanks to run the whole race!

  10. Oarar says:

    Surely this is a good thing for F1?

    So (some) teams may have to shed half their workforce – but won’t the new teams coming in be a good take up for these staff?

    Isn’t having technical flexibility – instead of restriction – part of F1′ fingerprint? I would hate to see this lost (and also I would hate to see KERS standardised for the same reasons).

    Don’t we want lots of variety and a healthy sport which is good value for those in it?

    I visited Donnington GP cars collection last week, and it really brought home to me the latter point. It was great to see the drivers side of things, AND, the engineering. The cars are the stars as well as drivers.

    I can forsee a bit more wiggle room on this yet too. I am sure Ferrari will throw it’s toys out and threaten a walk out. I reckon there’s another 10 million, and/or the lift on the *only* part of the 2010 engine cost exclusion, left to go with the FIA.

    But one thing’s for sure, this is here to stay. And when the recession is over – it will remain as the guard for the future.

  11. Snail says:

    The teams will also be allowed unlimited out-of-season track testing with no restrictions on the scale and speed of wind tunnel testing.

    James, is that “all teams” or “capped teams”?

  12. Ferrari bluff called. Like idea of 26 cars on the grid, and £40m is going to call David Richards, USF1 and the bigger gp2 teams, etc bluff as well. Looks as though FIA has fallen out of love with the manufacturer teams, and wants a return to la Garagistes, and customer engines, as the only viable to maintain a long, economically viable future for f1. Think the uncap budget option is both a sop and bear trap to the manufacturer teams, technical innovation will win out.

  13. krad says:

    Awesome, i hope this brings in a few new teams in the next few years. I will be fairly happy if the manufacturers disappear as it means more opportunities for teams and drivers.

  14. Steve says:

    I’m sure historically this will judged this as a good idea. Getting new teams on the grid to increase the level of competition can only make for even more excitement on race days. The old days of who had the most money would win F1 are gone from 2010 – now it’s all about the smartest most innovative teams and the best drivers.

    The King is dead, long live the King.

  15. Oarar says:

    And on the “Two Tier Championship” topic…

    Two things here:

    A) It would only be two tier if some of the teams do not go for this option. Honestly, I think this unlikely – the attractiveness of unfettered engine revs (benefits manufacturers), moveable front and back wings (will this affect the exisiting movable front wing rules?) and the recession will see to that.

    B) We already have a two-tier championship! Some teams have KERS and some do not. This is a team option, just like this budget cap. Has this affected our enjoyment of this years racing? Have we all fallen over ourselves as fans in confusion trying to work it out? No. We can’t get enough of it at the moment – vintage F1!

    F1 is simple. The cars that go the fastest and are driven the best – with a team effort, reliability and strategy – win. Do we as fans and viewers of F1 care how a team gets there? We are already aware of F1 being a technical race, as a well as literal one – this changes nothing.

    I would even go as far to say (abstractly) that we have a *multi* tier championship now! :) Each team in it’s own tier of competiveness. The only way to never have a ‘tier’ of any sort is to have homogenous cars – and that would ruin this sport.

    Oarar

  16. Paul_G says:

    Whilst I agree with a cost-cap, this should apply to all teams and be phased-in over several years. A two-tier system will not work in the long term and all teams will be forced to operate under the cap (shedding hundreds of jobs) as the benefits of running an unlimited engine and other technical freedoms will make a huge difference.

    I can also see potential political problems ahead between uncapped and capped teams: If for example, Torro Rosso were to run under the cap, would Ferrari be happy with them running their engine unrestricted ?

  17. Robert McKay says:

    I think the budget cap in itself is a good idea, but presenting it in this two-tier system does not seem the best way forward.

    I suppose it depends on how much extra you have to spend to make it worthwhile to still beat the capped teams, even with their extra technical freedoms. And how long it will be before the FIA offers extra incentives and/or rule changes to bring the capped teams closer to parity to the bigger spending teams.

    But it seems hard to escape the fact that you will have a formula within a formula with this situation, even if the FIA apparently doesn’t see it like that.

  18. john g says:

    well i think we can be sure that di montezemolo won’t hold back – hopefully he will blast this ill-judged and rushed proposal out of the water. how can the FIA be so arrogant as just to push through such massive rule changes with no regard to the competitors actually involved?

  19. Ben G says:

    This is more bad news from Bernie & Co for UK PLC. With all the job losses and cost cuts the UK is in danger of losing its place as the centre of motor racing excellence. On top of which is the loss of the British GP.

    Building fast racing cars was one of the last great aspects of British manufacturing that remained. I wonder if anyone in the Government will make a comment? Or are they still too embarrassed about that donation?

  20. Jon says:

    This is a shame. In a few years F1 will be barely recognisable. It is getting harder and harder to explain F1 to casual fans. And if you want 26 cars, how about a NASCAR or MotoGP points system? 1 point for 8th out of 26 cars seems a joke.

    If there is one thing I hate about Max’s regime it’s too much change year to year. Absolutely no stability, that in itself costs money. So many of his “cost cutting” changes are hypocritical and do more harm then good. I could name numerous examples, but who cares in a dictatorship all that matters is what the boss says. I will admit he has done “some” good, but overall it’s just a mess.

    I could go on and on and on but it’s not worth complaining too much, as there is nothing we can do about it. :(

  21. Mav says:

    James. Bit of a Carlsberg blog going on here. Good stuff. Can I ask if a) You think this is the final figure? And b) Can you give a very brief summary on how you think the various teams feel about this?

  22. Alan T says:

    I hope all the FOTA teams tell BE & MM to shove these rules and not sign up to them on the 22/29 may

  23. jbstans says:

    What I don’t understand, is how is this “technical freedom” going to be of much use if they don’t have the budget to develop it?

    It’s all very well saying “you can do whatever you want as long as it only costs <£40m” but you can only do so much with £40m.

    I’m also worried it’s going to lead to tediously predictable seasons with car development either being very slow or dying halfway through the season as they reach their budget caps..

  24. Ewan says:

    I assume McLaren, BMW, Toyota and Ferrari are already breaking out their F1 engine departments into seperate companies, ready to sell to anyone out there in 2011? Even if you never sell the engine to anyone but your own team, surely it’d be legally tricky for the FIA to control the engine costs if you were happy to lose money.

    Do you think the additional teams will end up including a McLaren B-team and a Maserati team running Ferrari engines?

  25. David L says:

    I feel the budget cap is important for the future, and in a few years time this will probably be the accepted view, however it must be implemented carefully. It will level the playing field and I hope produce some very close racing throughout the whole field. In recent years the the more moeny you spent the more success you had. Not a particularly healthly position.

    This looks like a very middle of the road decision, trying to keep everyone interested. Drivers being out of the cap keeps the big teams interested (they pay the most) and doesn’t make any difference to potential new entrants (they’ll probably be chasing pay drivers or giving youth a chance). I wouldn’t be suprised to see the 40 million raised a bit, and possibly the FIA offering more incentives for new teams. Whats happened to the £50 million McLaren gave them a few years ago?

  26. Kevin M says:

    My questions is when does the budget cap kick in? Is it in place for the calendar year of 2010 or does it include any work currently being undertaken for the 2010 car? Surely not the calendar year as that would effectively mean you could throw whatever money you like at the car now.

    I’m also interested in the date for signing up for the 2010 championship. Will this effect Brawn GP in any way? I know there’s been talk of Virgin or other sponsors jumping in for naming rights. Would that mean any potential ‘ownership’ deal would need to be completed before then?

  27. Leg-End says:

    “Remuneration for test or race drivers, including any young driver programmes;”

    Does this mean we will be seeing top teams such as Red Bull dropping their yound driver programs in order to save money for other areas of the team? That’s not great news for aspiring young talents that don’t quite have the funds to compete at the higher levels.

  28. Alexis says:

    Unlimited revs and moveable wings sound very very interesting!

  29. Robochimp says:

    I dont agree Ben, with Lola and Aston Martin likely to enter, its likely to consolidate GB’s position as the lead constructing nation.

  30. john g says:

    are we saying that a capped team can only spend £40m but if its sponsorship plus prize money comes to £40m then they basically race for free – so a manufacturer can run a team for nothing?

    also what needs to be addressed asap is how the FIA controls the technical freedom of the capped teams. say the first race shows that the capped teams have a massive advantage. what will the FIA do?
    1) change the limits of technical freedom to the capped teams based on that race
    2) leave it and see what happens and make a decision at random later on in the year by which time the championships could be almost decided
    3) leave it and don’t bother to touch it, knowing that the uncapped teams will have to opt for the capped budget in order to be competitive.

    it’s basically in the FIA’s hands to force everyone into a budget capped operation if they wanted to, which could well be at odds with the promise of the apparent ‘choice’ in the matter.

    with everything that’s happened however, i think we need the FIA however to be less involved with the racing and what happens on track

  31. F1 King says:

    Just curious regarding the engine revs. Since majority of customer engineers are supplied by manufactures ie ferrari, mclaren and toyota. Just a devilish thought to me that these teams could provide alternative engines to them which will be equivalent to their rev-down engines in horsepower. In this case, the rev limited engines will no longer be a handicap any more !

  32. jed says:

    I guess this is the reason of the mclaren lenient penalty. mclaren has no choice but to be on the FIA side.
    Nevertheless, the budget cap is a great idea. It ensures the future of this sport and ends “checkbook racing”.
    This way it is the best driver and the best manufacturer that will really win as opposed to the rich manufacturer, who may not necessarily be the best but used their wealth to get an advantage which may not be available to poorer teams.

  33. MartLee says:

    I’d like to hear more about the exemption of “Dividends (including any tax thereon) paid from profits relating to participation in the Championship.”

    Initially I thought this was just to allow the Flavio’s and Whitmarsh’s to continue eacrning the ‘big money’ by taking it as a dividend instead.

    But am I right in thinking a team with a staff bill of £40m could change their contracts to take the basic pay down to £20m, but (assuming they’re profitable) then payout another £20m in dividends to all staff, thereby keeping the current staff levels?

  34. Carlos says:

    I’d hate to be an engineer in F1. Hello, unpaid overtime, those who manage to keep their jobs.

    Those who don’t won’t find it easy to enter the automotive field right now either.

  35. Rhys Xanthis says:

    Refuelling ban hey…

    Seems like an idea not worth chasing in my opinion. I’m a relatively young person (just turned 18) and only started following F1 towards the end of last year, but I have gotten really into it, and went to the Australian GP this year.

    Refuelling, to me, is one of the more exciting things…sure passing cars in the pits is not the best solution, but I think that a refuelling ban will not help. I just don’t think we are at the stage just yet, where we can say that cars are able to pass each other on the track with ease – its just not feasible at the moment. Its easier in ’09 for sure, but its by no means easy overall.

    Personally I think the FIA should take more notice of FOTA and their proposals, rather than just dreaming up their own, plainly because they can.

    Its about time the FIA stopped pushing their own agenda so much, and using “cost cutting” as an excuse. If we listen to the teams in the first place, a much more desirable outcome can be obtained…better for the fans, better for the teams, and better for Formula 1.

    What are your thoughts James?

  36. Dan says:

    Personally i would like to see all teams being privateers, manufacturers supplying engines, technical freedom within box areas as is applied now, unlimited testing for rookie drivers only and low fuel qualifying.

    All this with a budget cap would ensure great racing and longevity im sure and this decision goes some way to achieving that.

    Great news.

  37. Drezman says:

    @mp4-19

    Please don’t lower the tone of James’ blog to forum troll standards. We know what today is, have some respect and be quiet.

  38. Barry says:

    Maybe we could see the return to F1 for Cosworth next season? with thre new teams coming in, it’s a possibility.

  39. k1w1 says:

    It’ll be interesting to see how a budget cap works on global scale. A budget cap of £40 million is all fine and dandy, but how is that working when you have partners all over the globe? Is this based on current exchange rates at the time? At the start of the season or some other date in time? Lets move the team to India and get some cheap labour. No doubt this is covered somewhere.

  40. Harry says:

    FIA, if you can see this. I would like to say you are BS! This’s the last season i watch, BS!

  41. James Allen says:

    Maybe, but Max has made major concessions to the manufacturers by exempting engines and driver salaries from the cap. For a manufacturer that adds another £50-80 million on, for 2010 at least.

  42. James Allen says:

    Capped

  43. LeighJW says:

    To David Patrick, the budget cap does not include fines imposed by the FIA.

  44. krad says:

    Success!!! I think the lower figure is there so they can seriously compete. Not make up the numbers and nick the odd point. The likes of prodrive and Lola want a chance to be able to win races. Who can honestly say Force india are going to this season unless something freaky happens in the race

  45. krad says:

    yep as its bases on total expenditure not net expenditure

  46. Peter Freeman says:

    I see that dividends from profit are not part of the budget cap. This means that key team personnel could take profit share rather than payment. This would be a key area to cut down ‘the cost’ while still spending a fortune.

    Also one could locate wind tunnels in countries like India, where costs of running them would be considerably lower.

  47. Alistair Blevins says:

    I disagree with your point about the more money you have the better you will do. Just look at Toyota and (until recently) Honda… both have thrown more than most at the sport for very little reward (indeed if rumour is to be believed, no one throws more at F1 than Toyota).

    Dieter Mateschitz went so far as to buy 2 teams and split the development costs!

    But I agree, the decision is very middle of the road. I’d call it half baked.

    I think we’re losing sight of the meritocracy of traditional F1 which I think is important. Yes McLaren and Ferrari have huge budgets, but they also have heritage and have worked hard for their place at the top of the pile. They’ve earned their place through hard work and innovation.

    Now it seems they’re being pegged back to the lowest common denominator.

    On the face of it. This isn’t how I want to see the sport run.

    On the other hand, I’ve said that with other decisions in the past and still seem to coming back for more!

  48. Peter Freeman says:

    Agreed.

    I wonder if Max has actually contributed anything of real significance to F1?

  49. Rhys Xanthis says:

    Look closer, this is excluded form the 40 million cap.

  50. Josh says:

    mp4-19,

    They did raise the sides of the cockpit in ’95, made massive improvements to side-on and head-on crash testing, slimmed down the visor height and several other safety developments.

  51. Dan says:

    Oh they see it that way but if the teams decide to go the uncapped way, FIA will adjust the rules to ensure they lose in 2010 and will have no choice but to adopt the capped rules for 2011 and it will become a one tier championship again.

    Its way of introducing the rules without ‘imposing’ them.

    IMO, 2010 will be a sh*t storm of politics and a very messy season, but will be fun to watch :)

  52. Snail says:

    Indeed. Even better if they are allowed wing-maps, just like they used to have engine maps (do they still have those), so you could adjust the wing angle continuously as you are approaching, entering, travelling through and exiting a corner.

    If only they’d bring back ground effect skirts and active suspension as well….

    I’ve always thought there should be a Formula X which is the pinnacle above Formula 1. Formula X would allow all of these technologies and also have 2 races per weekend, 1 in each direction on each circuit. I think it’d be really interesting racing a circuit both ways. Different racing lines in each direction, some drivers would be better one way than the other. But I would ban traction control.

    Anyway I can dream, I doubt it will happen.

    Why Formula X? Because its the eXtreme version of Formula 1.

  53. Snail says:

    When you pay dividends it is money that comes out of the company bank account. If you don’t exclude it then it will naturally fall into the things the company spent money on. So basically, its just an accountancy device to ensure that any teams that make a profit and distribute a dividend are not penalised for doing so.

    That said, your comment is an interesting development spending avoidance dodge, with the penalty that you make staff members shareholders – I suppose you have to give them non-voting shares if you cared about that sort of thing.

  54. Jon says:

    What’s wrong with different classes in MotoGP? It’s nothing different to GP2 or Formula 3. Lower power and slower speeds for the juniors as they progress and show their talent, and then they progress to the top level.

  55. James says:

    Given the limited amount of money they have to spend on improving the car, I’d say they’re doing pretty good when compared to the £80+ million that Ferrari and BMW threw at their cars last season.

    Success doesnt have to be measured in points. I’d say the fact that the team have so far managed to weather the financial storm of the recession is success. They’ve been able to run an F1 team which is only 1.2-1.5 seconds off the pace on less than half of the budget of the top teams is success. 10 years ago, that difference would’ve been 4 or 5 seconds per lap.

  56. Geoff says:

    (trying to reply to James)

    [quote]
    10 years ago, that difference would’ve been 4 or 5 seconds per lap.
    [/quote]

    Hasn’t there been a lot of tightening up of the rules over the last 10 years, so it is actually impossible to gain an extra 4 seconds no matter how much you spend?

  57. rpaco says:

    Carlos
    This is the same situation as many UK companies, shedding staff but expecting those left to continue to produce the same amount of work/output. In my career in the motor industry I never got paid once for my overtime of which I did lots. Ok I did not regularly work 24 hours straight as these guys do, but it is not uncommon to work a lot of overtime just to the the job done. I remember being invited to sign a waiver to the Euro working hours regs which I declined. Now I believe there is no possible voluntary exemption from that law in Europe, so how McLaren and co get away with it is a mystery.
    The whole motor manufacturing industry will undergo a huge change over the next 3 years with some major names disappearing, the support structure will also need to change. We may well see the end of any manufacturer involvement in F1 within the 3 years, if it survives that long.

  58. Snail says:

    There is a waiver in the UK, as there should be. In the last few days they tried to get the mandatory 48 hour working week introduced (again) and failed. Thankfully.

    If they succeeded, I wouldn’t be able to work the hours I need to (for myself) because I’d have to sue myself. Which is utterly ridiculous.

    So long as no one is forced to work extra hours, no problem. I’ve never worked for anyone that has been capable of forcing me to work longer than I want to.

    I work in the software industry. Its not uncommon for there to be times when work needs to, must be, done. On those occasions, you just have to get it done. The rest of the time you can kick back and relax (if you work at the right place, it really is a mix like that).

    But these 48 hour working week regulations would scupper all that.

    End long explanation of hour McLaren get away with – because it is legal, in the UK. Not legal in Germany (BWM, Toyota…).

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