Red Bull Racing is believed to be one of two teams alleged to have breached the budget cap in 2021 in the first major test of the sport’s financial regulations.
Formula 1 introduced a US$145 million budget cap in 2021 to equalise the competition and ensure the financial stability of all 10 teams.
The introduction of cost controls principally affected the sport’s three biggest constructors, Mercedes, Red Bull Racing and Ferrari, which were spending as much as twice the cap in previous years. All three were required to downsize their staff and reduce development to rein in spending.
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But the regulations don’t require annual spending to be filed with the FIA until the end of March, after which the lengthy account certification process begins.
The certification process is understood to be close to completion, with notification due as soon as this week.
Paddock speculation is rife that the certification process has found that Red Bull Racing and Aston Martin breached the 2021 cost cap.
Red Bull Racing said in a statement that any allegations are “all speculation at this stage”, and Christian Horner told Sky Sports that he was “certainly not aware of any [breaches]”.
“Certainly our submission was below the cap, and it’s down to the FIA to follow their process, which they are currently doing,” he said.
“It’s a brand-new set of regulations a set of very complicated regulations, so how the rules are interpreted and applied are invariably going to be subjective between the teams.”
The FIA refused to confirm whether any teams were under scrutiny for breaching the cap, with a spokesperson saying processing is still underway.
“The FIA is currently finalising the assessment of the 2021 financial data submitted by all Formula 1 teams,” the spokesperson said. “Alleged breaches of the financial regulations, if any, will be dealt with according to the formal process set out in the regulations.”
The financial regulations list two types of breaches: minor and material.
A minor breach is an overspend of less than 5 per cent, while a material breach is an overspend of 5 per cent of more.
Five per cent of the 2021 cost cap amounts to around US$7.25 million, which could amount to as many as 100 members of staff or significant percentage of a team’s annual aerodynamic development spend.
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Potential punishments for either type of breach include a deduction of points in the constructors and/or drivers championship; the suspension from one or more competition “stages”, not including races; a reduction of the team’s development allowance; and a reduction to the team’s cost cap in the current and/or following season.
The finding of a material breach can also lead to being suspended from one or more races or being excluded from the championship.
Punishments in the financial regulations are deliberately non-prescriptive to prevent teams from weighing the risk of breaking the rules against the cost specific penalties.
It’s unclear how significant a breach each team is alleged to have committed.
Any breach would cast Verstappen’s maiden title and is current championship lead into question, with the FIA able to levy punishments affecting either or both campaigns depending on where the spend was directed.
Max Verstappen won the 2021 drivers championship by just eight points. Red Bull Racing finished second to Mercedes in last year’s constructors championship.
However, it’s thought unlikely that the FIA will levy a retrospective penalty to change the result of last year’s title without a significant material overspend. A reduction in the team’s development and spending allowances next season is considered more likely.
Mercedes boss Toto Wolff said any overspend found in last year’s accounts could mean that Red Bull Racing’s financial methodology would put the team in breach for this year and future seasons too.
“It’s not just about 2021, it’s about 2022 and 2023,” he told Italy’s Sky Sport. “It’s about millions of dollars and the difference between winning and losing.
“It’s not just about 2021 but also about this year. If Red Bull adopts this strategy in terms of the development of its car, then it is also about 2022 and even 2023.”
Wolff said he expected any penalty to be severe to deter other teams from breaching the cap and copping a fine as the cost of doing business.
“Even if it’s only $5 million, if we and Ferrari knew we could spend $5 million more without getting a big penalty, we would do it,” he said.
“We now expect leadership and transparency from the FIA, and then we will see what the consequences are.
“The FIA now has to show itself, but it is mainly about following the sporting, technical and financial rules.
“We have confidence in the transparency and leadership of the FIA.”
Both Ferrari and Mercedes have openly questioned Red Bull Racing’s development spend this season, particularly after rumours emerged that the Milton Keynes squad was planning on introducing a dramatically lighter chassis by October, which would come at considerable expense.
Though Christian Horner denied that his team was planning such an upgrade, Mattia Binotto said in August that he had doubts about the FIA’s ability to police the financial regulations.
“Ferrari would never be capable of introducing a lightweight chassis or a different chassis though a season simply for the budget cap, and I would be very surprised if a team is capable of doing it.
“If they are, it is back to the regulation itself. Is it fair enough? Is it equitable enough? Is the policing sufficient? It’s a big question mark.
“It is a very green regulation at the moment. The number of people in the FIA monitoring it is very little.”
The FIA released a statement in the early hours of Saturday morning in Singapore calling for restraint on the matter.
“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.”
This year’s cost cap has been reduced to US$140 million, though there was considerable debate earlier in the year about raising the cap to account for rising inflation in Europe. The FIA eventually agreed to 3.1 per cent increase, which Horner said at the time wasn’t enough to cover increased costs.
Williams was the first team to be penalised under the financial regulations, though the British team was fined for a procedural breach for submitting its financial statements late to the FIA.
