F1’s budget cap controversy explained

The biggest talking point over the Singapore Grand Prix was not Max Verstappen’s imminent championship success but accusations that his team, Red Bull, may have overspent under Formula One’s new budget cap last year. The story divided F1’s paddock, with Red Bull team principal Christian Horner adamant that the accounts his team submitted in March fell under the budget cap and are compliant with the FIA’s financial regulations.

Aston Martin was also rumoured to have overspent in 2021, but again the news was fuelled by whispers in the paddock, with official findings from the FIA only due to be announced on Wednesday this week when certificates of compliance will be issued to teams that met the cap last year.

If it is found that a team did overspend last year, it will then enter a process to determine a sanction, which could range from a financial penalty to, in the most extreme cases, exclusion or suspension from the world championship.

Why does F1 have a budget cap?

F1 is, and always has been, a sport of vast inequalities. From wind tunnels at factories to wheel guns in the pit lane, there are big differences in the equipment each team uses, which invariably leads to big differences in performance on track.

In order to level the playing field and avoid huge brands spending their way to success, F1 and the FIA introduced a budget cap in 2021 in the hope that it would level the playing field by putting the emphasis on each team’s ingenuity rather than the depth of their pockets. Prior to the budget cap, the top teams had been spending well in excess of $400 million, and while the cap doesn’t cover everything, the factors that directly impact car development are now kept in check.

For the first season of the cap last year it was set at $145 million and this year it has reduced to $140 million, although that number has since been altered to compensate for rising inflation this year and additional races and sprint races. Next year the target will be set at $135 million, although that figure will also be adjusted to come in line with inflation and additional races.

What do we know so far?

Perhaps not as much as some of the headlines last weekend suggested. For weeks, even months, there have been rumours that certain teams may have exceeded the budget cap, but until the FIA issues its certificates of compliance on Wednesday we won’t know for sure. The process of auditing the team’s accounts is supposed to be confidential, which…