On Friday of last week, it was announced that the FIA was expected to announce that two Formula One teams exceeded the budget cap during the 2021 season. According to AutoWeek, reports originated from Germany’s Auto Motor and Italy’s Gazetta about the news, and “sources in the paddock pointed at Red Bull and Aston Martin.” While Red Bull team principal Christian Horner has called the allegations “defamatory” and stands by their submissions, as the team of defending Drivers’ Champion, Max Verstappen, it is concerning.
“The FIA is currently finalizing the assessments of the 2021 financial data submitted by all Formula One teams. Alleged breaches of the Financial Regulations, if any, will be dealt with according to the formal process set out in the regulations.” Said the FIA in an official statement. It continues, “The FIA notes significant and unsubstantiated speculation and conjecture in relation to this matter, and reiterates that the assessment is ongoing and due process will be followed without consideration to any external discussion.” Meaning, the FIA is aware of discussions from those outside the investigation, and that its decisions and determinations will not be influenced by them.
With that, I expect that the FIA will release the names of the teams that were over the cap with itemized lists of their infractions with evidence based on financial data to support their determinations.
Cap overspends are put into two categories. If teams are less than five percent over the cap, it’s considered a “minor overspend,” and if teams are more than five percent over the cap, it’s considered a “material overspend.” Both categories carry specific penalties.
If teams are determined to be in a “major breach” or “material overspend,” the penalties are as follows:
- A deduction of Drivers’ and Constructors’ Championship Points
- Reduction in the Cost Cap
- Suspension from an entire competition
- Suspension from one or more stages of the competition, which include sessions and races
- Exclusion from the Championship
- Financial penalties
If teams are determined to be in “minor breach” or “minor overspend,” the penalties are:
- Limitations in testing aerodynamics or otherwise
- Fines to be determined on case-by-case basis
- Deductions in Constructors’ or Drivers’ Championship points from the season being scrutinized
- Suspension from practice sessions
- Public reprimand
The top three drivers in the 2021 season were Red Bull’s Max Verstappen, followed by a Mercedes’ one-two in Lewis Hamilton and Valterri Bottas. The top three drivers finished with 395.5 points, 387.5 points, and 226 points–respectively. With just eight points separating Verstappen and Hamilton in 2021’s controversial finish, the possibility of having points deducted from Verstappen’s inaugural title season is concerning. Mercedes won the 2021 Constructors’ Championship with 613.5 points compared to Red Bull, which finished with 589.5 points. And with Ferrari finishing in third place with 262 points, Red Bull might be safe there, unless the FIA’s penalties for cap infractions are nuclear.
The bigger issue here is whether these audits will expose creative accounting. Historically, Formula One teams have always tried to skirt regulations and rules for competitive advantages. This isn’t anything new; it’s just magnified now under the cap. With that said, it also isn’t a secret that budget cap overages could be absorbed into power unit expenses, despite the terms in the Formula One Power Unit Financial Regulations agreement. I think the real deterrent for violating or attempting to push the envelope would be that disqualification for some teams could be fatal.
Taking this one step further, for teams that are car manufacturers like McLaren and Ferrari, they can find creative ways to skirt the cap by consulting with their commercial branch on research and development “ideas” they can apply to their Formula One cars. I’m not saying they do this now, but with inflation rising and the cap shrinking, “audit” or “audited” being mentioned 33 times in the power unit financial regulations means the FIA has teams on notice.
Conversely, Mercedes’ boss Toto Wolff told Sky Sports last week, “It’s weeks and months that they are investigated. Maybe he [Horner] doesn’t speak to his CFO. All of us have been investigated diligently and as far as we understand, there’s a team in a minor breach which is more procedural and another team that is fundamentally, massively over.” Wolff continued to say that the investigation is an “open secret in the paddock.” In a presumed response to Wolff’s comments, Horner said “Perhaps when these accusations are made, people in glass houses shouldn’t throw stones and we take umbrage and extremely serious the remarks that have been made.”
Since Verstappen joined Red Bull, Horner has been hunting Mercedes. And now that Red Bull is lapping Mercedes in both the Formula One Drivers’ and Constructors’ championships, commentary is going to be more personal. However, I don’t think that’s drama that fans should look too far into. For any teams on the grid, Wolff was correct in saying that “The crucial part is that if you’re over in 2021, you’re over in 2022. That means that you have an advantage into 2023. If it’s true they’ve homologated a lightweight chassis this year, they may use it next year. It’s a real cascade of events that can be influential in all the championships.”
Whichever teams are found to have committed any infractions, advantages for future cars are issues that they’ll have to sort through. Then again, advantages in development are why the cap was put in place to begin with. In any event, unless penalties have teeth and the FIA sends strong messages of deterrence, they’ll be immaterial and teams will continue to creatively circumvent or outright ignore breach rules.
This is still an ongoing investigation, so please be mindful of that, and that teams deserve the opportunity to respond to and appeal the penalties.
