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What happens if an F1 team breaks the budget cap?

What punishments can be handed out if a Formula 1 team spends too much money under the F1 Budget Cap?

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Formula 1‘s budget cap regulations caused a storm in the paddock ahead of the Singapore Grand Prix with at least two teams reportedly found to be in breach of the rules that were introduced in 2021.

Red Bull and Aston Martin allegedly went over the budget cap of $145 million last year with the FIA set to announce which teams have complied with the cost cap on Wednesday (October 5).

The punishments for teams which have failed to comply with the regulations depend on how much they have gone over the limit.

Minor overspend of F1 budget cap

If a team have gone over the budget cap by less than five percent, a team can be punished for the corresponding season where their finances have been audited, in this case 2021, or can be penalised for future seasons through limitations on testing such as time in the wind tunnel.

Here are the possible penalties for a minor overspend:

  • Public reprimand
  • Deduction of constructors’ championship points awarded for the championship
  • Deduction of drivers’ championship points awarded for the championship
  • Suspension from one or more stages of a competition
  • Limitations on ability to conduct aerodynamic or other testing
  • Reduction of the cost cap
Red Bull’s Max Verstappen leads at the start of the 2022 Canadian Grand Prix | REUTERS/Chris Helgren

Major overspend of F1 budget cap

A major or material overspend means a team has gone over the budget by more than five percent, so the penalties given can be more stringent.

The above penalties apply as well as some harsher sporting punishments:

  • Deduction of constructors’ championship points awarded for the championship
  • Deduction of drivers’ championship points awarded for the championship
  • Suspension from one or more stages of a competition
  • Limitations on the ability to conduct aerodynamic or other testing
  • Suspension from an entire competition
  • Exclusion from the championship
  • Reduction of the cost cap

The Cost Cap Administration Panel also have the power to order enhanced monitoring upon an F1 team that have been found guilty of a breach.

FIA President Mohammed bin Sulayem during a press conference as German manufacturer Audi announce they will join the Formula 1 World Championship from the 2026 season as a power unit supplier | REUTERS/Johanna Geron

Why does F1 have a budget cap?

As part of F1‘s desire to cut costs and make the sport more sustainable, a budget cap was introduced from the 2021 season.

In theory, it should equalise the competition as the bigger teams cannot spend millions more than the smaller teams which had been the case before 2021.

The cap applies to money spent on car development and performance which is why there is so much debate about the topic.

This is the first time the FIA and the Cost Cap Administration have examined accounts from a season after the teams submitted their documents earlier this year to meet the deadline of March 31.

War of words between Mercedes, Ferrari and Red Bull

When reports emerged that Red Bull are allegedly one of the teams that went over the budget cap limit in 2021, some big claims were made.

Mercedes team principal Toto Wolff described the allegations as a “heavyweight issue”.

“All of us have been investigated diligently and, as far as we understand, there is a team is in minor breach, which is more procedural, and another team that is fundamentally massively over and that is still being looked after,” Wolff told Sky Sports. “That is an open secret in the paddock.”

Ferrari racing director Laurent Mekies added: “We take it very seriously, because this is a serious amount of lap time. Seven million will be like 70 engineers. Seventy engineers, they will give you a serious amount of lap-time. That’s one example.

SINGAPORE, SINGAPORE – OCTOBER 02: Sergio Perez of Red Bull Racing leads Charles Leclerc of Ferrari during the 2022 Singapore Grand Prix | Clive Rose/Getty Images

“So, if you think about the power that these regulations have, these financial regulations have, it’s probably overpowering both the technical and sporting regulations at the same time.

“If you think about the amount of lap time that is lying into those sort of numbers. So, this is where, this is why we are very much looking forward to a transparent and severe approach.”

Christian Horner was not pleased, hinting that legal action could be taken by Red Bull for some of the comments.

“We were a little bit taken aback by comments that were coming from two of our rival teams,” Horner told the press.

“The submission between the team and the FIA is one that is confidential. I have no idea what the outcome of our rival submissions are, or their accounting treatment or so on.

“So I would be intrigued to know where their source of information for these fictitious claims have come from. And I mean, they’re hugely defamatory.

“We take umbrage to them, and one can only assume, it’s not uncoincidental that this is a point where Max has his first strike at the World Championship.

Red Bull Team Principal Christian Horner | REUTERS/Martin Keep

“How on earth do they have this information? Where do they have this knowledge? The FIA have even stated they haven’t even completed their process.

“So unless there is a clear withdrawal of those statements, we will be taking it incredibly seriously and looking at what the options available to us are, because it is absolutely unacceptable to be making comments of the type that were made.

“That is totally, as I say, defamatory to the team, to the brands, and even to Formula 1, and I’d be intrigued to know where their source of information has come from.”

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