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Why a Formula 1 cost cap might work this time around
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Posted By: James Allen  |  09 Feb 2014   |  2:21 pm GMT  |  159 comments

The priority for Formula 1 this year is to get costs under control and there are signs that the first steps towards achieving that may be within reach.

It was announced by the FIA at Christmas time that a budget cap would be brought in for 2015 and behind the scenes in recent weeks there have been extensive discussions which have proved more fruitful than in the past. The main stakeholders are all engaged: the teams, the FIA and the commercial rights holder.

F1 almost tore itself apart in 2009 when then FIA president Max Mosley tried for force a budget cap of €60 million on the teams and Ferrari led a rebellion which led to the teams announcing in July 2009 that they would leave F1 to start their own series.

This time round things are different; the bar is being set much higher, the object is to find consensus among the teams and there is a stronger desire to control costs. Although the teams share around $700 million a year between them in TV and prize money, it is not evenly distributed with the top teams taking the lions’s share and everyone far too dependent on sponsorship, which is elusive. So we have several teams close to the edge financially, unless they have a rich shareholder willing to write cheques to make up the shortfall.

The problem with Mosley’s approach to budget capping was that it was too confrontational and that it set the bar too low at the outset for the top teams. There was no way that Ferrari, Red Bull and the well funded teams would accept cutting their budgets by three quarters in one hit. In more recent times, Red Bull has become the team out on a limb, not wanting to give up its superiority which has been built on huge resources, which in turn buys the best people.

The way to achieve a budget cap is to start out by setting the ceiling at an acceptable level to the top teams and then set a gradual glide-path downward over a number of years to a level that works for the sport.


Although this doesn’t help the medium sized teams in the short term, what it will do is start the process, embed the principle of budget caps in the FIA Sporting Regulations and then gradually move the cap down to the right level whereby the teams can become self sufficient and can even turn a profit if they are well run.

It will also mean that the medium sized and smaller teams benefit more from assistance and collaborations from the top teams. We are seeing that already with the reduction in wind tunnel time to 30 hours per week. This allows the top teams to rent out tunnel time to the smaller teams. Also, for example, a team like Force India might get an engine, gearbox and whole back end, including suspension from Mercedes, or Sauber might do a similar deal with Ferrari. This would reduce costs for the smaller teams and also alleviate the pressure for customer cars, which some powerful figures would like, but which a strong majority is against.


Bernie Ecclestone has said today that he will offer €1 million to any whistleblower who informs the governing body if a team is cheating the budget cap. This is an inspired idea, as it’s a significant enough amount of money for someone employed at a team in the finance department or in the factory to consider risking their job for.

“The plan under consideration is to give €1 million to any whistleblower whose knowledge is proved to be accurate,” he told the Express. “We will then say to the team that the following year you will lose three of the maximum points you have scored. Then let’s see if they want to cheat.

“We have approved the budget cap. It is going to happen. Everyone agreed to $200 million. What hasn’t been agreed is what is in the $200 million.

“Unless we include everything, I am sure people will find ways around it. It’s going to be difficult.”

There are suggestions that the starting figure might be £200 million rather than dollars, but if they can get this across the line – and it seems from talking to the teams as though there may be a chance of consensus this time – then it will be a major breakthrough and the start of an important process.

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159 Comments
  1. Robert says:

    First idea of Bernie’s I’ve liked in some time…

    1. Sebee says:

      How does a guy come up with an idea to (insert word choice: reward/spiff/bribe/pay off) a whistleblower anyhow? :-)

      1. Peter Freeman says:

        Ha ha! Yes just WHERE did he get that idea from?

      2. BogRacer says:

        Well done Sebee!

    2. AndyK says:

      Haha.. A million dollars is certainly better than being awarded a medal;)

      1. monkey tennis says:

        …maybe he will double it up to $2million for the last race of the season. Just to keep people interested.

      2. James Allen says:

        Someone else got there first on that one!

    3. rvd says:

      It’s still self-serving, in that he hopes there will be less clamoring for a bigger piece of the FOM pie

      1. Cliff says:

        Exactly!

        The teams agree to a cost cap and CVC to hold on to their stake of the F1 Pie. Imagine the ongoing conversations:

        FOTA and others: Bernie, we need a greater share of the revenues, we can’t afford to compete!
        Bernie/FOM: But you don’t need any more money,
        FOTA: Why?
        Bernie: You’ve just agreed to a cut in costs, saving you 20-25% of your current budget, so how can you say that you need more money to compete?

        Bernie is thinking long term…Concorde Agreement. The only saving grace is that F1 probably won’t be floated until the Concord Agreement is in place.

      2. Andrew says:

        The last guy Bernie paid is in prison so I would be nevrous about taking his million :p

    4. Dimitar Kadrinski says:

      Couldn’t have said it better!

    5. JackL says:

      Its a good idea, but misguided. Just 1 mil? Think about what the whistleblower is doing. He’s exposing himself and his family and risking his current and future employment. Its a small street in F1 and if you p*ss off one of the big bosses they could go to great lengths to make sure you dont find work again. Looking at what whistleblowers in other industries have had to put up with, even when given government protection, its not a pretty picture. I think the reward should be much higher to compensate for that.

      Also, the idea of losing your best 3 results will hurt a team, but I dont think that’s enough. Maybe initially, while the budget cap is being worked into the regulations, but in the long term, if the budget cap is to be taken seriously, its got to be harsh. Exclusion from drivers and constructors championships would be more appropriate in my view.

      I also think they should follow the NBA’s example in regards to the budget cap. There, you pay a luxury tax of $2 for every $1 over the cap that you spend. So what the FIA could do is take the money from the luxury tax and distribute it amongst the teams in reverse championship order. Red Bull wants to spend millions? Fine. But Caterham and Marussia will see the biggest benefit. That’ll add long term and short term implications to over spending. Its worked beautifully in the NBA.

      1. Quercus says:

        The whole point is that with several hundred people working for a team, all tempted by the size of that reward, it’s highly unlikely that the management would risk cheating. There would be too many eyes watching what they’re doing.
        As an idea, ‘inspired’ is exactly the right word.

  2. Proesterchen says:

    Oh great, paying people for information, never in the history of man was such idea found to be fraught with peril.

    ‘I hear Jenny from accounting can make sure you’re information checks out!’

    ‘Person A was a rogue employee working to damage Team X for personal gain.’

    ‘Team Y encouraged Person A and Person B to plant evidence and report a breach at competitor Team X, respectively.’

    Oh, the intrigue of accusations and court battles, just what you need to entertain the customers.

  3. Olli says:

    If $200 million budget cap gets approved, I might actually see hope for this God-forsaken sport.

    1. Pete says:

      James, do you know how much big teams vs small teams spend now?

      1. James Allen says:

        Caterham around £85m, Marussia around £60m, Red Bull and Ferrari over £200m, Merc not far off

      2. iceman says:

        Wow, so even to come last Caterham are spending double what they thought the budget cap was going to be when they originally signed up.

      3. Tim says:

        With regard to the differing budgets it might be worth noting just how big the difference really is when it comes to development (for the benefit of any of your readers who may not know, not you James).
        At first glance it would appear that a team such as Red Bull has approx 3x the development budget compared to Marussia. In fact the difference is far greater. An F1 team has a baseline running cost of around £50million/ year for travel, factory, wages etc . So, in Marussia case this will leave about £10million for development. Red Bull obviously has a greater baseline running cost, so let’s say that it’s £100million for the sake of argument (it probably wouldn’t be quite as much). This leaves £100 million for development which is 10x the development budget. Hence Marussia have not got a hope of competing at the front. Apologies if it sounds like I am teaching anyone to suck eggs, but when I saw this on Sky a while back it was news to me, so It seems reasonable to assume others will have been unaware as well.

      4. Sri says:

        James, do those figures involve engine development department too? If yes, how come Red Bull spends an equal amount to Ferrari/Merc who are also engine developers? Do they have a bigger work force or higher salaries than other teams?

      5. James Allen says:

        No, those are audited differently

  4. Matt says:

    Amazing what can happen once Bernie decides he wants to do something.

    Hopefully all whistleblowers will have their privacy protected. Otherwise there’ll be a huge reputational cost and a fear of being blackballed from F1 teams weighing heavily in the ‘Lisa’s column.

    Fantastic news, looking forward to seeing how this’ll play out

    1. Matt says:

      Loss*……

  5. John Marshall says:

    Now, how about Bernie giving the teams a fairer share of the money? The teams get ridiculously little considering they are the “show.” I’m guessing Bernie being pro-cost control has an element of “look at this hand, and ignore what I’m doing with this other hand.”

    In combination with cost control, I’d really like to see a more equitable distribution of prize money. The skewed system, as it is, simply allows the rich to get richer. Look at several of the sports leagues in the U.S. and you can clearly see the benefit of a salary cap (I.e., more equitable spending) reflected in more competiveness. F1 would benefit, overall, from cost control and more fair distribution of money.

    1. radohc says:

      giving teams more money doesn’t change anything, you give them, they’ll spend more and that’s it.

      1. On even bigger ‘brand centre’s’ !!

      2. John Marshall says:

        How does it not improve the situation for teams like Lotus, for example, that are on the ragged edge of being able to race?

        Besides, what I said was, institute a spending cap AND give them a bigger piece of the pie that Bernie is taking too much of.

    2. Proesterchen says:

      Oh, the US leagues, pinnacle of employee exploitation by a couple of dozen super-wealthy individuals.

      Sure, what a lovely prospect for F1′s future.

      1. Gaz Boy says:

        Absolutely agree. Copying the American system on budget caps in sports is just like swapping lard for chip grease; it wouldn’t solve F1′s bloated and lop sided fiscal state. A better distribution of F1′s revenues to all the teams is the way forward.

      2. John Marshall says:

        You’re ignoring my point about salary caps and addressing a different problem.

      3. Proesterchen says:

        I understood your point to be that you’d rather force the big, well-funded teams, to make huge profits, than employ more people, even against their will.

        If I misunderstood you, please correct me!

      4. John Marshall says:

        You have an interesting agenda…one which was not in my post. You have stated a similar agenda in response to several people. I’m guessing you’ll read what you want to in whatever response I would try to make to that agenda.

        Where in my post do I propose the whole system should be aimed at higher profits? Where do I say the money should go to the owners? How does it even logically follow from what I posted?

        All I said, to repeat, is that the sport could be benefit from cost control and more equitable sharing of the money generated by the sport.

      5. Proesterchen says:

        @John Marschall

        If you’re arguing for controlling costs, you’re arguing for money to be diverted from the industry and into the pockets of the owners.

        Teams currently spending more than any proposed cap will have to curtail that, teams below the threshold will not all of the sudden find extra resources to spend.

        What if $200m was the initial cap?

        Congratulations, you just forced Red Bull, Ferrari, Mercedes, and probably McLaren to lay off people and take as profits money they’d rather spent on racing.

        With every extra dollar you’re cutting, you’re making this worse, the industry as a whole shrinks, you’re putting people on the street, and you’re doing nothing to help teams that are still unable to gain enough income to finance a full budget.

        Of course, you’re also arguing that the revenues of the sport should be divided more equally among its contestants. Fair enough, lets see how this would turn out:

        How about if we change the teams pay-out from >.5 to .75 of F1 revenues, and also give every team the same piece of that much larger pie? They’d end up with about $110m each.

        Sure, they’ll all be able to add some sort of sponsorship to that, but you still wouldn’t want budget differences to grow to large, so you might set the cap at $150m.

        You just shrank the industry by 20%. 1 out of 5 people gone, not just at the team, but the suppliers and their suppliers, too. (It’s people all the way down!)

        But I’m sure Fiat, Daimler, McLaren, and Mr Mateschitz will appreciate your efforts in netting them at least $120m each.

      6. John Marshall says:

        Besides, F1 is already controlled by a super wealthy individual exploiting the teams.

      7. Lawrence says:

        If you set it at 150m or 200m and spread it more equally you would not be cutting the industry as stated Proesterchen as any individuals lost by a top team could now be afforded by the bottom teams who would see their budgets grow in some cases close to double.

        I have never understood the F1 model of please come fill out our field and be part of our show that brings in so much revenue but watch us give all the combined monies earned to just the top few. Would their product not be more valuable with more competition increasing the size of the pie for all?

        As these tools have been used in US sports I see no way to argue that it has hurt any team, look at raising values across the board, any player, look at the rise of both top paid players and minimum pay numbers, or competition, look how rare dynasties have become. The only people it has hurt has been the pocketbook of the fan and no one punches the fan wallet more than F1 already does.

      8. Proesterchen says:

        Formula 1 as a whole spent about $2.3 to 2.5 billion last year.

        If you capped at $200m each, and handed all teams full budgets (sure, why not), the industry as a whole would shrink by more than $100m.

        Of course, no one is given anything, especially with commercial agreements running through the 2020 season, so when you cap at $200m, in the real world you’ll end up with five teams with a full budget, Red Bull may find a way to make Toro Rosso a sixth, and the rest still short of that mark because their income just isn’t there.

        Realistically, a $200m cap would see the industry shrink to $1.7b, maybe $1.8b, or over 20%. You can do the math for $150m yourself, I’m sure it’s going to look ugly.

        But hey, the guys behind the top 5 teams would be forced to save a whole lot of money, hundreds of millions they have so far gladly spent on engineers and suppliers. What a glorious idea.

      9. Lawrence says:

        Your figures include far more than team budget spending and thus are not relevant to your point.

      10. Karl Jin says:

        Your entire series of posts assume that the current economics of (teams spending 2.5+b a year) is sustainable. I argue that it is not. Otherwise we wouldn’t have so many teams entering, failing to compete because of lack of resources and sponsors, and consequently withdraw. In what aspect does that look sustainable?

        If you argue that it is, you just disagreed with most of team principals and FIA officials, so go ponder your intelligence long and hard.

        In my opinion, the NBA style luxury tax is the fair way to go, and that clearly avoids all the problems you bring up, even assuming the current economics is sustainable. If you don’t know the details, you shouldn’t just bring some random arguments before learning them.

      11. Proesterchen says:

        In the past 15 seasons of Formula 1, we lost Prost GP (2001/02) and Arrows (2002), while adding Carterham (2010) and Marussia (2010). Toyota, Super Aguri, and HRT came and went.

        22 cars fielded by 11 teams started the 1999 Australian GP.

        22 cars fielded by 11 teams will start the 2014 Australian GP.

        And there are supposedly three groups trying to gain an entry for the 2015 season.

        But lets leave the pesky data aside, what’s the worst that might happen? Marussia or Caterham shut down, the industry shrinks by about 3 or 4%, respectively.

        You have to remember that the first 10 teams do get considerable money from the price pool, and if there’s no 11th to fight, you could field the worst team and still make a profit.

        And that’s the crux, doesn’t matter what the top teams spent (which is what cap supporters want to curtail), the back markers will stay around as long as they’re making a profit.

  6. Sebee says:

    Grasp that, 200m to field 2 cars for 20 races. 5m per race per car. You can be sure top teams spend 10m per race per car. Insane!

    Someone should start a 36 car full-contact supercar GT series where only 918, LaFerrari and P1s are allowed. It would be cheaper. Who wouldn’t watch a supercar demolition derby every two weeks?

    1. Andrew Carter says:

      Me.

    2. MISTER says:

      Me! I don’t watch sportscar racing for the crashes..

    3. James Clayton says:

      Me

    4. Roddie says:

      Maldonado will be king there!

      1. Sebee says:

        Roddie,

        Check how proper everyone is on here. As if everyone here likes gentleman racing and high tea and no one ever wants wheels to bang or some carbon to fly.

        Yeah, I disagree with all of you.

        And actully you disagree with yourselves when you complain about the rulings, panalties, etc.

        Just think how excited you all get, how you jump in your seat, bite your nails or cringe when something gos wrong in the heat of a moment battle when any driver tries a pass outside the DRS zone.

        With the clean and sanitized passes of the DRS, and all the “law enforcement” on track, you’re lucky if you see some risks taken on track. So you’ve forgotten what it’s like.

        And to prove how full of it you guys are. Senna/Prost? Yeah…I’ve heard you go endlessly about how awesome it was. Those to never exchanged carbon fibre, right?

      2. Roddie says:

        I don’t know how to answer you this because I honestly wasn’t even born when the Senna/Prost rivalry was on :)

        When I got into F1, Schumacher was having a blast with Ferrari; I think he’s the reason I got interested in it.

        I think that not just F1 but sports in general have suffered from new rules and regulations that somehow seek to ensure the athlete’s safety. This is why people look back with shiny eyes the “good ‘ol days” where few rules meant more risks, hence more entertainment.

        Today’s F1 might seem bland or sanitized, as you say, with all these rules and Tilke-tracks. But they’re made to avoid regretful accidents or unnecesary deaths like the ones that happened in the past. Maybe some rules need polishing to enable an equilibrium between entertainment and safety.

        I’m sure the Senna/Prost times were indubitably exciting, but F1 will never be the same. It has evolved into a “safer” sport which inevitably means less unpredictability. Purists might not like all these rules and restrictions, but the drivers’ family and close friends sure do.

        Personally I’m OK with the new technologies like DRS and KERS or ERS. They only thing I’d work on are the way stewards sanction the drivers. Everything these days is given a drive-through or a 10 sec. stop & go. They need to give the drivers a little more freedom to overtake or how they move on track. But of course as time passes, these rules will be polished enough to ensure a balance between safety and risk.

  7. Scuderia McLaren says:

    There is so much wrong with the whistle blower idea that I don’t know where to begin. Don’t get me wrong, whistle blowers are to be commended, in the main, for their courage and integrity in the face of pressure to keep quiet. But this huge financial incentive will have a big knee jerk reactions within the teams internally. Remember what damage Alonso did to McLaren in 2007? It almost destroyed the whole morale of the team let alone the $100m fine. Plus how reliable is it? It will vary per team and per culture how willing people are to whistle blow or how loyal senior employees are. For example it would be much rarer to get a Ferrari whistle blower than say a Lotus or Force India one. Therefore the practical implementation of self regulation using financial induced whistle blowing rules are yet again not equal across the teams.

    If anything, the promise of anonymity is what would be key to balance those fearful of Ferrari for example against those willing to stick it into Lotus for example. But zero financial gain should be offered in order to keep the whistle blowing pure. Ultimately it’s hardly a reliable and consistent way across all teams to keep them in check.

    #dumbidea

    1. AuraF1 says:

      People leave Ferrari all the time. It’s not a haven of omertà style secrecy. It’s actually quite difficult to spend money in total secrecy. Steal it – yes! Spend it – no. So rewarding whistleblowers is a distasteful but probably workable idea.

    2. bobster says:

      I think the whistleblower’s evidence would have to be presented at a tribunal. This was the case with Alonso’s evidence. So that already has a steadying effect – you can’t just say “X happened”, you have to come forward and allow that to be tested in court.

      Kind of like happened with crashgate. There were rumours flying, but Mosley, correctly, insisted that somebody had to come forward to FIA with evidence that could be presented and tested.

      Saying “Rosie puts a sugar above the limit in the boss’s tea” is one thing, but to get the reward you have to put that forward as evidence – which means it can be examined and attacked by the defence – and if it holds up and if the case is proven THEN you get the reward.

      1. Proesterchen says:

        So you go to Rosie and offer her something in return for making sure that, in fact and provably, there was too much sugar in the tea.

        Seriously, this isn’t rocket science: If someone offers incentives, people (and teams) will find ways to exploit them.

      2. bobster says:

        I did say it would have to stand up in a hearing.

        The model for so many issues around the cost cap and around whistle blowing is Sypgate. FIA’s auditors were able to uncover a vast amount of detailed information.

        So in my hypothetical case they ask the team boss and he says “Blimey! I thought it was a bit on the sweet side, I never asked her to do that, honest.”

        There would have to be an instruction along the lines of “an exta lump, Rosie, and nobody needs to know” and prosecution would have to find that. Of course, if they start digging around emails and cell phone records they might find a trail back from Rosie to whoever put her up to it.

        This is why Rosie has to be sure of her case. She’s got to come forward and say that there was an extra lump in the boss’s cup BECAUSE she was told to put it there. If there’s no instruction then why did she do it? It’s not the team, it’s something else. So the whistleblower always has to be sure about their motives as well as the motive.

      3. Proesterchen says:

        @bobster

        Ah, but if you let that be an allowable defence, it’ll get used all the time.

        Indeed, there might develop a market for employees who’ll gladly take the blame (and a cushy job in another part of the company) in exchange for buying teams a short-term budget advantage.

        Seriously, nothing good can come from a monetary incentive. No matter how you word the rules, you’ll always enable some one to benefit, or at least damage the opposition. And if it can be done, it will be done, this is F1 after all.

        PS: I’m sure snoops would love it, though, can you imagine the background checks people will be put through if their actions could massively harm a team, especially if they’re coming from the competition?

      4. Lawrence says:

        Because the team would just roll over to this? If Rosie is found out she gets no million, she gets jail time for fraud and sued by some of the richest people on earth. These incentives to tell are used all the time in all industries because They Work.

      5. Proesterchen says:

        @Lawrence

        I didn’t know if you were kidding until you mentioned jail time.

  8. Sven says:

    They could start with giving a fair deal to all the teams on how
    the money earned from Formula 1 is shared.
    This is the elephant in the room that Bernie won’t discuss.

    1. Gaz Boy says:

      Well said. At the moment the financial distribution amongst the teams is iniquitous to say the least; for example under the “grandee teams” contract signed between Mr E and Bull, Fezza, Macca, Frank and Merc all the aforementioned teams will get a nice big juicy pay cheque irrespective of where they finish in the constructors title while a worthy team like Lotus/Enstone can do well in the championship and yet earn crumbs from not being included in the “bernie clique”, hence why had 30 million reasons to take Pastor.
      Den of iniquity? That’s the current fiscal distribution of F1. Sad but true.

  9. Andy says:

    There are two stumbling blocks, one is the usual what’s included and what isn’t, which has been argued for months, and the second is “€1 million to any whistleblower whose knowledge is proved to be accurate,”
    The key point being “proved to be accurate”. The whistleblower can’t provide evidence because I imagine that would be theft of company property.

    The problem with F1 teams is that they will spend every penny regardless, hence some will always be struggling financially. What have the lesser teams done with all of the money they’ve saved by not having a separate test team, unlimited testing, spare cars, quali engines, unlimited race engines etc?

    I’m all for a budget cap but I can’t see it happening anytime soon and it won’t necessarily help the lesser teams.

    1. bobster says:

      The “theft of company property” attack against whistle blowing has not been used before.

      In Spygate, if such a defence was allowed, all Macca would do was protest that much of the evidence in question was on McLaren computers and thus their exclusive property, nobody else’s business.

      Besides, Alonson, Hamilton and de la Rosa were all offered immunity from prosecution if they made a full disclosure, and Alonso was protected by FIA after the 2nd trial.

      In Crashgate the court would have had to disregard the evidence of both Piquet and Permayne.

  10. surya kumar says:

    I dont understand why the budget cap is not workable for the top teams. F1 is the pinnacle of Motorsports and if engineers can find clever ways on the Aero and Engineering side then they can also work out clever ways on the budget side. I truly beleive that with reduced budgets you can come up with innovative ideas on cost cutting.

    1. MISTER says:

      You are misunderstanding this sport. The engineers have an idea, but that idea requires money to build a new front wing for example. And then once is built, they need to test it. Once is tested, the make a few adjustments and then test it again, and again and again.

      This is just a wild guess, but looking at McLaren’s problems last year and in particular the pull rod suspension, I would say they did a lot of tests and spent a lot of money before taking the decission to switch from push rod. In the end, it seems it didn’t work out and they lost big time. Mu point is that for every good idea that pays out, there are 10 bad ideas on which money and time is spent and who end up in the bin, sort of speak. And every now and then, even bad ideas get approved.

      The pull rod suspension is not necessarily a bad idea, because it seems it works in Ferrari’s case, but it didn’t in McLaren’s.

    2. Rich C says:

      >> F1 is the pinnacle of Motorsports

      No, that would be LMP1 & LMP2.

      F1 is the pinnacle of insane spending on microscopic aero tweaks.

      1. goggomobil says:

        The budget cup will never happen,before there’s any chance the F1 must become in the mould of Formula Renault.I would go further and say you will not se an engine development freeze any time soon Ferrari will se to that, the only team in FIA with veto.
        The R/D is a MUST in any competing market place,take the pharmaceutical industry they do spend $ millions on millions in R/D on a drug
        be it for cancer/aids or what not, and no guaranties at the end.
        Today motoring is as safe as ever before, and great deal must be attributed to motor sport and in particular F1.

  11. Urko says:

    If Ecclestone has anything with this, then I have no trust at all.

  12. Urko says:

    Ohhh, that payment to Gribkowsky was also a reward..??;)

  13. Gary Honey says:

    I’m all for F1 technical innovation that offers “social value” such as improved automobile or medical tech, or ecological advances like the new power trains or contributions by Williams and McLaren to Formula E. However spending vast sums on new front wings or bodywork, that offer very little and just push up the cost of Race Tickets and Pay TV Rights to the normal fan is (personally) a turn off. Impose a budget gap but also increase the number of FIA standard parts to include front wings and bodywork.

    Oh and why did “hard up” Lotus go all the way to Jerez for their filming day….save your pennies, go to Silverstone and employ a driver of merit, instead of PDVSA boy!

    1. Peter Freeman says:

      Its not the cost of developing the cars that’s driving up the price of being a fan. FOM paid out a dividend of $850 million not long ago, that’s PROFIT. What did the teams earn after costs? What the teams do adds to the show, what FOM does is move the show around and take money for doing so…

      1. Gaz Boy says:

        Blame for this can be pretty much laid at CVC, who like the sharks they are take a big chunk of the profits out of F1 without reinvesting them back in the sport. Strong words, but true.

  14. Spyros says:

    Until I hear something about the means to enforce it, day-to-day, I’m not impressed.

    1 million (of any currency) may sound like a lot of money, but it’s a fairly safe bet that blowing the whistle means that you would not be able to work in the sport, ever again.

    1. darren w says:

      As Joe Saward might say…forensic accounting.

      1. Spyros says:

        Interesting. My wife is an unemployed accountant, I think I’ll tell her to send her CV to FIA…

    2. bobster says:

      Alonso did not want for work. Permayne is still at Lotus (then Renault). Even Pat Symonds (had the whistle blown on him) is back in the game, and the guy he replaced at Williams was Mike Coughlan.

      1. Proesterchen says:

        And what do they all have in common?

        1 million of anything wouldn’t have turned them whistle-blower.

      2. bobster says:

        I’m just saying that the record shows that blowing the whistle, or being the subject of a whistle blowing, doesn’t necessarily end one’s career.

      3. Spyros says:

        Thank you for reinforcing the point I was trying to make. Your list basically tells us that being shown to be a crook/cheat or having knowledge of cheating and keeping quiet (Alonso) is MUCH better than whistle-blowing.

        Also, don’t forget that the gents already mentioned have unique talents, to greater or lesser extent. The employee that has knowledge on overspending won’t necessarily be a top engineer or driver, it might easily be an accountant, or someone else whose name doesn’t make the headlines every other weekend. Someone whose professional abilities are NOT irreplaceable… do you really think such a person would ever be considered for hire in F1, or motorsport in general?

  15. Grant H says:

    In the case of the big teams this 200 million budget cap will play out as reduced development. Whether this 200 million includes salaries or not – if teams are not developing cars at the same level is it fair to say some people could lose thier jobs? Or recruitment freeze etc? Sad if this is the case.

    Appreciate that if nothing is done whole teams could lose thier jobs

    1. Proesterchen says:

      Well, of course, that’s exactly what any sort of cap is going to lead to: massive lay-offs.

      On the other hand, those 10 poor, hungry, and hapless F1 team owners (or ownership groups) will finally be kept from incurring losses on the backs of their greedy employees! About time, don’t you think?

    2. bobster says:

      Well it depends on what is included. The original Mosley plan would have effected just the design, building and development of the car. Not marketing, not salaries. So all teams would have the same resources to spend on the car.

      It was FOTA that came up with other methods like reducing the number of staff that could attend a race.

      1. Grant H says:

        Note even the mosely plan means lay off’s as reduced design and manufacture means you only need lower head count, F1 operations will be run like any other manufacturing business,

      2. bobster says:

        Fair comment. Though remember that Mosley wasn’t calling for a cap on overall expenditure – just a cap on what is spent on the car. There was no limit on wind tunnel hours, for example, but they had to be logged and would be costed out at a standard price.

        Meanwhile FOTA came out with proposals about the number of truckies, the number of PR people etc.

        Yes, probably both methods would lead to a loss of jobs but I think the Mosley plan kinder and more flexible. Under that plan you could still move staff to a new job description, have as many drivers as you want. And it may allow the rule book to be simplified because money becomes a finite resource that you must use as best you can.

  16. Andrew M says:

    Good idea in principle, very hard to police in practice given the complexities in some of the teams’ corporate structures.

    Interesting idea to try and bring “qui tam” rewards to whistleblowers, very interesting to see if that reaps anything going forwards.

  17. Random 79 says:

    “Why a Formula 1 cost cap might work this time around”

    Because we crossed our fingers really, really tight ;)

    1. Tim says:

      …and the Angels promised to pray really hard :-)

      1. Roddie says:

        But whatever you do…don’t blink!

      2. Tim says:

        That would be prey, not pray wouldn’t it ? ;-)

      3. Roddie says:

        Quite indeed Tim :)

  18. Gaz Boy says:

    The idea of cost cutting is very worthy, and I wholeheartedly agree with it.
    However………..can we really imagine ALL the teams reaching a consensus with each other? Let’s face it, teams have self-interest as their No.1 priority, and trying to get them to agree on anything seems very, very difficult indeed. Let’s face it, if one team goes bust – as Hispania did a couple of years ago – the other teams think “great, one less team means more prize money for us.” I apologise for sounding cynical, but the teams always putting themselves first instead of the sport.
    Prove me wrong teams, prove me wrong!
    On a separate note, I know its not strictly related to this issue although it is related to F1 coverage, but I was just glancing at the Beebs choice of races a few moments ago. (I haven’t got Sky, anyway I like DC and Ben commentary, good combination) It’s a shame Melbourne isn’t live, but showing Malaysia is an inspired choice, always an exciting race on a good track (one of Tilke’s better creations, along with Turkey) that is often rain affected. My only slight criticism is that for this year I would have had Monaco live instead of Barcelona. Monaco, you say? That’s a dull race, isn’t it? In all fairness, we’ve had some great moments in Monte Carlo over the years including 2004 where Jenson chased Jarno for all his worth after Fernando binned it trying to overtake Ralf in the tunnel (???) and Michael being rammed by Monty UNDER THE SAFETY CAR of all times, 2005 that great fight between Fernando, Nick and Mark where the Williams duo dived past a gripless Fernando, 2008 and that superb wet/dry comeback drive from Lewis and 2011 was shaping up to be a tasty finale with Seb, Fernando and Jenson until that red flag took the sting out of it. See, Monaco is not as dull as everyone might think. Otherwise, Beeb’s choice of live races is pretty well spot on with their “sharing” agreement, to be honest, everyone would have some difficulty picking 9 out of 19 races, so well done to Suzi and the lads for picking a decent bunch.

  19. Joe S says:

    I don’t think a hard cap is feasible, but the concept of a soft cap with a “luxury tax” certainly is. Under this construct, any team that spends over the cap has to pay a certain percentage in penalties to the team pool, and can be disproportionately distributed to back marker teams.

    The one downside to this strategy is that you could provide back teams a perverse incentive if not done carefully, but it should be negligible compared to the benefit. You could also use some sort of 107% rule whereby the teams still have to have a minimally competent car in order to qualify.

  20. Chromatic says:

    Seeking out whistleblowers and dangling double points and all the other schemes to entice or coerce the teams into line…

    Something not very pleasant about Bernie and the FIA continually portraying the teams as not Honest/ Mature/ Responsible/ wise enough. This was not the case just a decade ago.

    1. Random 79 says:

      Yes because honest/mature/responsible/wise describes Bernie and the FIA perfectly :)

      1. Gaz Boy says:

        Why isn’t the acronym of the governing body of Formula 1 called the IAF – International Automobile Federation? Why do we have the French version instead? Correct me if I’m wrong but I’m sure English is the dominant language of the car industry, the sports industry, the media industry, the music industry, telecommunications industry and basically the primary language of the world. I know the International Automobile Federation is based in Paris, but still, calling the governing body of F1 – which is still predominantly British – seems a bit arbitrary, but there you go……cest la vie! Ha ha!

      2. Random 79 says:

        English is the official language of F1, but that’s as far as I would go.

        The rest is just tradition (like continuing to call Toro Rosso Toro Rosso instead of something like Red Bull Jr.).

        I would also say that English is the primary language of the world, but that’s probably because damn near everything I see, hear and speak is in English so naturally I assume that everyone speaks it – if I lived in Mexico for example I’d probably think that Spanish was the primary language of the world.

      3. Gaz Boy says:

        Good little essay Random, but I’ll still prefer it to be IAF. However, with Mr Todt in charge, unlikely to happen.

  21. greg says:

    I think the only way to make it fair is put a meter on each factory and give a fixed amount of credits, small teams can use theirs at others facilities if using wind tunnels etc. Everything a team does to improve uses electricity. Install a real time logger that records all computer work so off the premises work can’t be done. The budget cap is not fair as some people are worth more than others, but to restrict the amount of hours and power will make it equal.

    1. Random 79 says:

      Would this include the blender?

      1. Gaz Boy says:

        And the tea/coffee machines? Apparently Torro and Fezza get through a lot of mocha’s on a race weekend. Don’t deny them their basic right to a smooth creamy latte…………..

  22. Dave P says:

    James, How can you say that’s an inspired idea?… It’s why he should not be there any more.. from a man used accused of bribes.. about to go to court.. Its not the way any business is done. It says to the sponsors.. do not trust your money in teams that will cheat.

    Its fraut with problems. The reality is that what is called a cheat.. will be expalined a different way by the teams. As you saw earlier, the Mercedes Board do not take kindly to being called cheats, so when a greedy employee makes an accusation and Mercedes pull out Bernnie will not look so clever then.

    The cost restrictions will ultimately not work as teams will circumvent… they will however have a desireable effect.

    1. Random 79 says:

      The man who had the whistle blown on him for bribery offers a bribe to entice whistle blowers.

      Ironic really.

  23. darren w says:

    Love the idea that the sport could finally move towards a cost cap, but I am not sure how smaller teams would “benefit more from assistance and collaboration from the top teams” under such a scenario.

    Those agreements still represent a small team subsidy of big teams. If I were a small team, I would look at the money I spend on these arrangements and talk with other small teams to see, if pooled, our combined resources could give me part ownership of my own wind tunnel and develop my own in-house design capabilities; perhaps even collaborating in key areas technical areas through sharing rather than spending.

    This approach leaves open the possibility of finding technical solutions that close the gap to the front. The current agreements between large and small teams seem to effectively wall off the possibility of technical innovation beyond the limitations posed by the technical regulations…but only for part of the grid.

    On the sponsorship front, a cap could make investments in small F1 teams actually appear meaningful. Every dollar invested to reach the budget cap could believably contribute getting closer to achieving points, podiums, wins or even…championships.

    Right now every new dollar brought into a small team will just be matched by $2 or $3 new dollars brought into a big team to keep the little guys at arm’s reach.

    The NFL just wrapped up its season with a Super Bowl victory by Seattle’s Seahawks. They used the motivational phrase “Why not us?” Because of the league’s salary cap and revenue sharing agreements, that phrase actually holds water in a way that it never could in F1 today.

    I actually like the idea of a larger budget cap. F1 is so awash with money (TV and race revenue, sponsorships, direct investment) that there really is no reason why it couldn’t support larger teams overall if the playing field was remotely level.

    And that doesn’t even account for the fact that so much money is simply siphoned right out of the sport by the Commercial Rights holder.

    A budget cap doesn’t need to mean austerity. F1 could reasonably expect to grow under a budget cap, with larger overall employment, investment and revenues.

    1. Gaz Boy says:

      This is an excellent essay, but, unfortunately I can’t imagine the big boys deliberately denuding their advantage – fiscal and technical – for the benefit of the smaller teams. Merc, Macca, Fezza and Bull have invested heavily in their facilities and personnel, so they would be unlikely to jeopardise it in the interest of other teams benefiting. I agree with cost cutting, but a good way to balance the books in F1 is to have a more equitable pay distribution for all the teams. Still, like your idealism, but you know F1, they don’t like idealism unless if it’s for a specific teams benefit.

      1. darren w says:

        I guess that is why I don’t quite understand the strategies being deployed by the small teams.

        They continue to focus on battling the teams closest to them on the grid…fighting for F1′s pocket change…when the real battle is to overcome the institutionalized deficit they face in relation to the sport’s biggest teams. The real money is up front, both in terms of prize money and the ability to attract sponsorship.

        If they ever want to challenge for podiums, wins, championships…and the money, they need to solve this structural deficit. To do that they need to step back and understand where the value is in F1 today.

        I would argue that greatest competitive value is locked up in the limits on CFD, Wind Tunnel and On-Track Testing time. These development quotas are the sport’s most valuable resource, a resource whose strategic potential will stay locked up if the small teams don’t change how they think about it.

        Instead of considering only their own meagre allocation, they need to think in terms of the entire grid’s allocation and how much of that allocation they can control.

        What could they do if they had more? Time in this regard represents development power.

        So if you were Caterham, Marussia, Sauber and Force India, the coordinated use of their combined allocation could give them all the development power to displace Williams, Torro Rosso and Lotus to the rear of the standings by moving the collective group closer to the top teams.

        Such an outcome would shift a substantial portion of the sports prize money to this collective and help them further build a challenge to the sport’s biggest teams: Ferrari, Mercedes, Red Bull and McLaren.

        I do admit to liking a little idealism to start the day, but if the game is permanently rigged against me, it is probably time to mess with the rigging.

        Since the small teams don’t have the political juice to get the sport’s power players to change the game and level the playing field, they need to find creative ways to work with what they have an empower themselves.

        They can’t reasonably attract more money, so they need to think beyond money and remove it conceptually as their main obstacle to success.

        Mining the cdf, wind tunnel and on track development time in a coordinated fashion is the most self-interested thing they could do.

        And it would make for great F1 intrigue.

      2. Gaz Boy says:

        Another excellent essay Darren. I think your comments have a lot of validity and viability. I think we can all agree that the fiscal structure of F1 is lop-sided and unbalanced and needs reforming. Unfortunately the big boys in F1 looks after their own interests only, so whether your recommendations would ever be implemented remains to be seen. You have some excellent ideas, ever considered applying for a post at the FIA Darren? They could use your common sense down to earth approach big time!!!!

  24. j says:

    The first few years cost control won’t be perfect, and there may be some ways for the teams to cheat around it but at least it will be a bit more difficult and the loopholes can be closed up over time.

    A team COULD find a way to cheat but that doesn’t mean that the whole idea should be abandoned. I crook could also break the front window and walk right in but that doesn’t mean we stop locking the doors.

  25. michael grig says:

    “WANTED” old poster, new clothes; may be this time it will work; it asked for one with money;
    the idea is worthy and the inventor has the buck; the “big” guys should they worry of transfers…inside rats….what else ?!?! you tell me…

  26. RandSl says:

    Bernie’s scheme is cute.

    It won’t work, but it’s cute. It is just too easy for the large teams to cheat. They have so many subdivisions, so many wholly owned subsidiaries in foreign lands. Those subdivisions don’t even have to build anything, just design and test. All the construction can remain at the approved factory. Final construction is now just a small portion of an F1 team’s budget.

    >Wind tunnel testing can be outsourced.

    >CFD testing can be outsourced.

    >Component design can be outsourced.

    > Only a single man within the team would need to know with absolute certainty that the team was illegally outsourcing. The top man is the only one. A one-time payout of a million smackers isn’t going to tempt someone that makes many times that each and every year.

    As for the bounty, anyone planning on collecting Bernie’s million will certainly research how whistle-blowers have typically fared in the past. What they’ll find won’t instill confidence.

    Whistle-blowers are rarely paid promptly. They often wait years, sometimes over a decade for their payout.

    Whistle-blowers burn every bridge in their industry. They will never work in Formula One again. Their names won’t remain secret. That Million has to make up for a lifetime of lost wages. For most, a single million won’t come close.

    Whistle-blowers sometimes don’t get paid at all. The group on which they’ve blown the whistle can beat the charges. The organization can provide plausible explanations. They can fabricate records. The can agree to a political settlement.

    Whistle-blowers often have their lives ruined. Perhaps the most common recourse is for an organization to attack the credibility of the whistle-blower himself. They hire private investigators to rip the lives of whistle-blowers apart.

    Budget caps work in football because the teams can’t outsource players to firms in another hemisphere. F1 teams can do this, and it won’t be verified, cannot be verified.

    No one is going to get get access to Ferrari’s books, or FIAT’s. This is scrutineering by honor code, and we all know how well that would work in practice.

    1. Fireman says:

      Wind tunnel testing and CFD is already limited for this season. If you’re correct about outsourcing those limitations should be also impossible. So how did they managed that?

      1. James Allen says:

        Why? It becomes a facility other customers can use, just like any wind tunnel business

      2. Fireman says:

        Seems I have to clarify my point.

        If outsourcing makes cost cap impossible, shouldn’t outsourcing wind tunnel testing and CFD make their limitations impossible? This is under RandSl’s notion that outsourcing can be hidden.

        Since the teams already agreed on wind tunnel testing and CFD limitations it seems like outsourcing isn’t the problem. That is, they can’t outsource their CFD calculations to some subdivision without anyone knowing. If they could, all limitations would be pretty useless.

        Hope it’s clear now.

      3. SteveS says:

        The cost of CFD is dropping as computer power increases. It’s one thing to limit CFD when using it requires renting time on a super-computer at some major research institution. But these days you could build a workable computer cluster in your bedroom and do CFD on that. How is F1 going to regulate CFD then?

      4. mtm says:

        The cap is to cut costs, not to specifically limit CFD… if it becomes super cheap then there’s not really a problem as all teams will be able to do it super cheap. In any case there will always be a human cost in the software, modeling and testing as they strive for ever more accurate models.

      5. Fireman says:

        More like, are they really even regulating it now?

      6. Proesterchen says:

        The really silly thing is that Formula 1 has actually imposed a fixed Teraflops limit to CFD, basically in an effort to keep teams from having to upgrade their old iron machines to more modern hardware.

        Now technically, this limit is supposed to be revised in 3 years, but with no incentive to actually upgrade in the interim, and the revision based on what teams will own at that time, what are the chances we’ll see an update in line with the growth of the industy?

    2. j says:

      These kinds of comments are silly. Of course the shareholders of a public company, and the government where the company pays taxes, know exactly what earnings and expenditures are in the books.

      1. RandSl says:

        That’s quite a naive view.

        The shareholders don’t receive detailed accounts of spending. At best, they’ll see how each division does.

        Taxes? They’re filed in dozens of nations, and the FIA will never see them. FIAT, Mercedes, Red Bull, and McLaren are not going to open the books of their parent companies and unrelated subdivisions with the FIA.

        The FIA is not a government agency. They have no right to see any corporate documents. Their auditors will only ever be granted access to the team’s books. In many cases, the team is a very small subdivision of the larger corporation.

        That’s why Bernie is offering this million. He knows the teams will never be caught by an audit. The only way they’ll ever be caught out is by a whistle-blower.

        Bernie’s offering far too little to attract someone in the know. It’s a cute scheme, but it won’t work.

        It’s really no different than if the FIA stopped post race checks and instead, put a million dollar bounty on cheaters. Who would believe the other side wasn’t cheating?

  27. AndyFov says:

    We’ll all be moaning about this budget cap as soon as it leads to chasing teams abandoning mid-season development because they’ve run out of cash.

    1. Random 79 says:

      Mid-season? That’s optimistic – it wouldn’t surprise me if one or two teams ran out of cash after two races.

  28. Joe S says:

    I’ll believe it when I see it.

  29. Rich B says:

    shame the teams can’t just be honest and stick to the cap. any team caught over spending should get a 2 year ban, that should stop them even thinking of spending a penny over it.

  30. aveli says:

    budget capping is a great addition to the rules but the reward system should also be made fairer to reduce the insentive to cheat. for example a race winner earns 22 points and last car 1 point with the distribution of funds inline with the points distribution. this will introduce fairness and reduce hardship in the sport.

  31. CW says:

    It’s €2 million if they blow the whistle on the last race of the season.

    1. Tim says:

      Easily the best comment I’ve read today 8:)

  32. Erik says:

    1 million is too low. I think Bernie factored in the loss of job for the whistleblower, but not the loss of reputation. It’s potentially a career ending move to divulge sensitive information, especially if you work in something like the accounts team. Who would hire that person again and trust them with sensitive information, inside or outside F1? The reward should be higher so that the loss of career is compensated. The right intentions but like most of the announcement today, it’s just a starting point, something to build on.

    1. Random 79 says:

      I imagine that someone who is willing blow the whistle on their employer for a quick million is not going to worry about their reputation :)

      But if one million is too low maybe the reward should be the amount that they can prove their team has exceeded the budget cap?

  33. I know says:

    It won’t work. Unlike in a sport where most of the cost are transfer fees and salaries, in an engineering sport like F1, you cannot have works teams like Ferrari and pure F1 teams like RedBull under the same set of financial regulations. That would require forensic accountants, which the teams will never allow, as the “whistle blower” idea by Ecclestone just proves.

    If the teams agree to a salary cap, then they do it in the full knowledge that it won’t work. They might prove me wrong, but I doubt it.

  34. Mike84 says:

    Anyone in a position to know enough to blow the whistle would probably lose more than a million euro by sinking their career. No matter how many laws you make, career success comes down to whether employers like you. And they won’t like you if they see you as a bounty hunter.

  35. Tone says:

    If there’s a €2 million budget cap per team, doesn’t that effectively give Red Bull €4 million given they have two teams?

  36. Craig in Manila says:

    Can anyone tell me any sport where a budget cap has been implemented and actually worked ?

    I’m aware that many sports have salary caps to attempt to stop individual, cash-flush teams from buying all the good players but I’m not aware of any sport (or even a business) where there is a budget cap that is meant to cover the whole operations of the entire business entity ?

    1. darren w says:

      NFL seems to work just fine. Incredibly competitive top to bottom, big markets to small markets. Budget caps and league wide revenue sharing by the teams (TV included).

      1. Kimi4WDC says:

        That’s the sharing part that is off the limits wiht current F1 structure.

  37. Flyboy says:

    I have never understood why Max and Bernie were not prosecuted for fraud by the EU for the sale of the F-1 commercial rights for a ridiculous sum… There is no way that was not an insider deal.
    The EU should void the contract and sue to recover the funds and then the FIA should structure an equitable distribution scheme. A fixed sum for each team and then an additional sum based on results.

    1. chris green says:

      i agree flyboy. the max / bernie deal lies at the heart of all f1′s money problems,

  38. Yak says:

    I don’t suspect the idea is for a whistleblower to put their own team in it. Surely anyone who did that would basically be ending their career in F1. Even outside of F1, you’re someone who turned your back on your own team and people for a million.

    I think the idea is more to point the finger at other teams, or for people connected to F1 who might have some insider knowledge but are not actually employed in a team. And there are always people moving from one team to another. Putting your own team in it is one thing, but moving to another team and then putting your former team in it… well that’s just playing the big F1 game.

  39. Rich C says:

    SO if they buy an engine, gearbox, rear end and powertrain assembly, that’s at least 1/2 a customer car already, isn’t it?

    1. Random 79 says:

      Yep, after that all they need is a hood ornament and a bobble head.

  40. Richard says:

    Not in a million years! The pressure is too high. The FIA cannot introduce the most complex formula in the history of F1 and expect teams to stick to a defined budget cap. It’s practical! As Christian Horner says you can’t introduce a cap from the top down. If this is ever to be done it will have to be from the bottom up. When this finally sinks in perhaps it may happen some day. As for the whistleblower, they would never work in F1 again! When common sense prevails and the formula is simplified/restricted then the possibility will exist for reducing costs, but not before.

  41. chris green says:

    read it and weep people

    1974 world championship
    7 different winners
    6 different pole winners
    33 teams across the season
    63 drivers competed in at least 1 race
    14 customer car teams
    19 factory teams
    2 all american teams (parnelli, penske)

    the championship was won at the last race.

    the total budget for a top team was around 750,000 pounds! an individual driver could secure a 1 race deal for about 4000 pounds.
    a race ready cosworth dfv was around 8000 pounds.
    there were lots of new young chargers and the grid was chock full of talent. fittipaldi,peterson,lauda,reutemann,scheckter de-pallier, hulme, mass, ickx, jabouille, amon, regazzoni, revson, donohue, andretti, watson, jarier, pace, hailwood, pryce, hunt…

    the cars didn’t all look the same and there was more than 1 tyre manufacturer.

    what more would an f1 fan want.

    f1 2014 has lost the plot.

    1. Gaz Boy says:

      Interesting analysis. Significantly, 1974 was the year many western economies went into melt-down because of the oil crisis. That caused inflation to be rampant in many western economies (because the price of petrol increased four-fold) and hyper inflation plagued many western economies for the rest of the 70s. Many western countries switched to neo-liberal economic strategies in the 80s (famously Thatcherism in the UK) which controlled inflation but caused the gap between haves and have nots to soar. The neo-liberal economic strategy has affected Formula 1: for example, in the mid 70s a driver earned 10 times what a mechanic’s salary would be. Today, the pay gap between a salaried mechanic and a salaried driver (i.e Alonso) could be as much as 200 times higher, even more. So in a way, the mid to late 70s was a turning point for western economies and Formula 1 too.

      1. chris green says:

        well said gaz boy. i picked 1974 as it is exactly 40 years ago and the the sport was just starting to see the arrival of bigger sponsorships like tobacco. 1974 budgets were significantly more than 1970 but less than 1980.

        the point is that f1 was financially a lot healthier and dare i say more competitive.
        any team that could develop a competitive package was welcome, young drivers got a chance and the cars were much more exciting to watch. the main downsides were safety and reliability.
        anyone who hasn’t seen ronnie peterson in action has really missed something. bottom line is that better racing can be had at much less cost than today’s f1. too bad BE nicked all the loot.

      2. Gaz Boy says:

        Chris, couldn’t agree more with your comments. In 1974 and 1975, James Hunt annual salary was around £200,000 a year. That was a huge amount of money in the mid 70s, but a chief mechanic make take home a salary of £20,000, in other words the ratio between drivers and mechanics was 10:1. There’s a income distribution graph called the Geni co-efficient which measures income distibution in the western world, and if you look at the early to mid 70s the income distribution in the real world outside of F1 was about the same: in other words Formula 1 and western society was at its most equal in terms of fiscal distribution during the 70s. However, the emergence of Thatcherism and Reganism (as well as Mr E, Clinton, Blair and Brown) would erode that financial equality and we are living with the consequences both in the real world and in F1. Formula 1 is a very accurate barometer of western society.

  42. TJ says:

    Frankly there’s probably little chance of the process not descending into chaos as per usual.

    However if,

    a) all the revenues from TV rights are earmarked for equitable distribution between teams.

    b) the process was overseen/managed by the teams themselves or an independent body………There might be a glimmer of hope

    But all thats occurred in the past was those who one would expect to get the lions share did so by hook or by crook and those that one could have reasonably expected to safeguard the best interests of the sport were too busy getting what they could from the trough..

    If history serves then what one can expect teams to receive is the leftovers…so little change expected with over half the teams unable to compete in any meaningful way while CVC/Ecclestone continue to bleed the sport dry.

    Was amused with Ecclestone’s $1m whistleblower bounty, but when that other whistleblower (Gribkowsky) spilt the beans on F1 last year his reaction was far less charitable….

    1. Random 79 says:

      “When that other whistleblower (Gribkowsky) spilt the beans on F1 last year his reaction was far less charitable….”

      Understandable really: He did bribe the guy in good faith ;)

  43. Delgado says:

    Any sport, system or industry ultimately breaks down when it becomes too complex and top heavy. The good news is that most are able to renew themselves after working through such a crisis.
    Go karts anyone? No, thought not. This is Formula One! Around and around we go…superb article and a fantastic comments thread. Love it!

  44. Chris Severin says:

    We often here about discussions behind the scenes but what does this actually mean? Is it really individual team principles speaking on the phone with others or are some teams in the habit of having conference calls? Do Horner, Wolff and Dennis etc sit down for a nice skype call over a cup of tea?

    How much do you know about what happens or possibly more interestingly how it happens behind these infamous closed doors James?

  45. Fellowes says:

    Whilst a budget cap offers financial stability to a team, I think from a fan’s perspective this could be very intering if all other cost related restrictions are removed e.g.:
    No limit on engine or gearbox quantities…use as many as you can afford.
    No limit on testing…do as much as you can afford.
    This would mix things up, depending on where teams prefer to spend money.

  46. Bart says:

    So if Ferrari say that RB is cheating and RB is found guilty, will Ferrari get 1 milion?

    1. Random 79 says:

      Ferrari would never accuse RBR of cheating!

      1. Random 79 says:

        Yeah I should probably add ;)

  47. SteveS says:

    A budget cap in F1 is quite unworkable, for reasons which have been endlessly discussed over the years.

    Discussion of a budget cap seems to function as a distraction from those measures which *could* very easily be implemented … for instance, a more equitable sharing of the spoils.

  48. Rishi says:

    This certainly looks like a fairly big positive step in the right direction.

    However, at risk of being too pessimistic let’s not forget that we’ve been here before. When the 2009 budget cap was rejected the teams came up with the Resource Restriction Agreement (RRA) as an alternative. The plan? To get the biggest teams’ costs down incrementally. Alas it all started well but once the belt was meant to be tightened further some teams left the RRA unhappy/sceptical with how it was being policed (or so they say). Cue another round of spending. So, yes, this is good news but the road will be long (and probably winding!).

    1. Yak says:

      The RRA was as the name implied though, just an agreement. And then supposedly some of the teams decided they longer wanted to be a part of the agreement.

      The new cost cap measures will be in the regulations. If a team wants to be in F1, they don’t have a choice whether or not they want to be a part of the new cost cap. They can of course choose to break the rules, but being caught doing so will come with a penalty. Hopefully that penalty would be significant enough to deter teams from breaking the rules.

  49. Keith says:

    James,

    This budget cap concept does throw up a lot of other possibilities, which haven’t been talked about.

    We currently have a limited number of gearboxes per season, use any more and you face a grid penalty. As for the engine, there are new laws this year I believe. You still have a limited number of engines per say for the season, but they have allowed you to interchange parts of the new power plant, a number of times, without it affecting the total number of engines. You can explain that better than me.

    Here is a new idea. We limit the number of new front wings and rear wings to the car per season to say 5 in total. That means the team can only bring 5 new designs of the front wing or rear wing to the track. There will be allowable changes to the wing for dry and wet running. Charlie Whiting and his team, put the wing in a jig or rack and take a digital picture of it, noting all the key parts, and give it a number, say number 1 out of 5. Use anymore new designed wings and you face a grid penalty. Of course you can bring as many example of the wings to the track, of say number 2 design, because your driver may have an off and damage the wings. But you’re only allowed 5 new designs per season.

    The amount of money spend on wing design is massive, running into the many, many millions of dollars. This type of expenditure would stop, and thereby allow the smaller teams, to be just as creative with their designs as the bigger teams.

    A future option would be to allow only the two main drivers to do just 2,000KM of testing each during the season. But allow the team to undertake 10,000KM in total, with the remaining 6,000KM been done by the third driver, development driver, or some form of test driver. This would also include tyre testing times. It would allow the “junior” drivers to gain valuable car experience, and the teams to see how there perform.

    1. Dave Emberton says:

      We’ve had engine and gearbox limits for years to cut costs, but somehow it doesn’t seem to have worked. The testing ban didn’t seem to cut costs much either, and had other unintended consequences.

      I’m not sure limits on number of wings really works either, unless you’re going to go the whole hog and only allow a certain number of updates to the whole car – but then that gets very difficult and complicated to police.

  50. Tyler says:

    Cap the budget and free up the technical regulations. That would make for interesting engineering ideas

    1. Dave Emberton says:

      It would probably lead to one team finding a big advantage (e.g. Brawn with the double diffuser), but nobody else would be able to afford to respond. It’d make for a very dull season.

  51. Arshad Altaf says:

    First was the shape of the cars, then refuelling (the best part albiet dangerous) and now many other things e.g. going green and sustainability. How can luxury (of its own kind), speed and glamour be controlled for spending ludicrous amounts of money. There will always be ways around.

  52. Dave Emberton says:

    Is this budget cap going to include engines? Presumably not, because how do you police how much Ferrari pays Ferrari for an engine, for example.

    And what about teams sharing parts? If Ferrari spend $50m developing a gearbox and sell it to Marussia for $10m, does the full $50m count against Ferrari’s total budget, or is it $40m? Presumably the latter, because that would encourage the big teams to share technology and help the lesser teams, but then that means they can setup a customer parts business as a way of getting round the budget cap.

  53. JohnBt says:

    What whistle can the small teams blow?
    Only the top teams can afford the whistles.
    It’s softer, slower, nosier, lesser, anything but speed.

  54. SteveS says:

    Let me throw out a question to the readers.

    Given a choice between (a) a budget cap of 200 million euro per team would could be enforced (and let’s just assume it actually COULD be enforced) or (b) a more equitable sharing of the profits of F1 among the teams, which would you chose?

    Both have the same end result, of closing the gap in spending between the have’s and have-not’s. They just tackle it from different directions. The first option lowers the amount the big teams can spend while the second increases the amount the poor teams can spend.

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