Why F1’s cost cap faces "game over" risk on results day

Formula 1 is braced for what could be a critical test of its long-term future on Monday, amid concerns a wrong step could signal "game over" for the cost cap.

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After months of analysis and a number of delays, including on Wednesday when it missed its own self-declared deadline, the FIA is finally due to announce the results of its audit into F1 teams' finances for the 2021 world championship on Monday.

This moment will define whether or not they each complied with the circa $145 million budget cap limit that was in place.

Those given the okay will get their certificates of compliance. Any that didn't risk a cost cap hearing and penalties.

But rather than this be just a standard procedural moment, the paddock whispers in Singapore that two teams may have breached the rules have left the sport on tenterhooks for what could be a hugely significant announcement.

With the cost cap having been a core component of F1's plans to deliver a closer grid over the long haul by levelling out spending between all competitors, the FIA faces a hugely difficult balancing act in dealing with potential problems.

Go down hard on teams that have exceeded the limits for what are incredibly new rules, and it risks causing huge controversy over a 2021 campaign that still remains a sore topic for many.

But brush any potential breaches under the carpet by letting them go, or hand down too weak a penalty on any rule breakers, and it risks opening the flood gates in making other teams feel that overspending is not something they really need to worry about.

It is no surprise that Ferrari was so open in Singapore last weekend about just how important a moment this is for F1's cost cap era.

Racing director Laurent Mekies said: "It is a very vital test for the cost cap. And if we don't pass that test, it's probably game over, because the implications are huge."

Charles Leclerc, Ferrari F1-75, George Russell, Mercedes W13

Charles Leclerc, Ferrari F1-75, George Russell, Mercedes W13

Photo by: Mark Sutton / Motorsport Images

What has left top teams like Mercedes and Ferrari so up in arms over potential overspending by others is that they know how much performance is being left on the table by them rigorously sticking to the cost cap limit.

Their fear is that if other teams have found ways to get around spending limits but stay with the letter of the law, or are happy to overspend and just take sanctions on the chin, then they will be forced to change tact.

Red Bull submission

Despite all the spotlight in Singapore being on Red Bull, and suspicions that its upgrade spending has been out of kilter with others, team boss Christian Horner was clear that its 2021 submission was below the limit.

In fact, insiders have suggested that its audited accounts were several million dollars below the $145m limit, and have not been impacted by spending clarifications that the FIA has issued in recent months as it has gone through each team's audits.

"It is significantly below," said team boss Christian Horner. "With the clarifications, we should be even further below...."

The final judgement is of course the FIA's, just as the tax authorities may not always agree with an individual's own self-assessment.

Only the FIA can decide the fair value of spending Red Bull has made, and how much work that off-shoots like Red Bull Technology has to be attributed to the F1 budget.

Furthermore, the FIA needs to make a call on what outgoings are designated to the 2021 campaign and what towards 2022.

And that is why there is such interest in what the outcome will be on Wednesday from those teams who feel that not all teams are operating with the same restrictions.

As Mekies said: "I think the worry comes from if you think about the level of constraints that has (been) imposed on the big teams, then you realise how much lap time there is going to be if you don't strictly enforce them.

"We were massively constrained and therefore any million, any leak you allow in the budget cap, is going to turn into a few tenths of seconds on the car."

Max Verstappen, Red Bull Racing RB18

Max Verstappen, Red Bull Racing RB18

Photo by: Erik Junius

But the situation is not only important to the big teams, because if the cost cap situation evolves into a Wild West scenario – where all the squads decide they can now be fast and loose with it – then that undermines the whole aim of it in levelling up the grid.

The risk then is that the bigger teams will simply accelerate their spending – and take future penalties on the chin – knowing full well that the end result is a car that is much quicker.

That is why how the FIA handles the cost cap, and how transparent it is in its judgement on each team's affairs, is as of big interest to the smaller squads as it is to the larger ones.

Memories of the secret deal that the FIA agreed with Ferrari over its 2019 power unit remain a sore point for many in the paddock.

The FIA will not have an easy task coming up with a response that leaves all parties happy if teams are found to have broken the limit. And if it gives all 10 squads the all-clear, that will equally serve to trigger disquiet in the paddock if there is no explanation why.

As Haas boss Gunther Steiner said: "If there is a breach, I would say we have to make sure that we are informed: if there were loopholes, what we think they are, that everybody understands them. And obviously loopholes means different opinions of regulation. So, to clarify what that is."

Sticking to the plan

Whatever the outcome of Monday's announcement, the message from teams up and down the grid is clear: F1 should not abandon the cost cap just because it has faced difficulties at its first hurdle.

Alfa Romeo boss Fred Vasseur said: "We knew from the beginning when we voted for the cost cap that it will be difficult, first to put in place for the big teams, and then to police it.

"But now we took the decision, we have to go for it. There is no way back and we can't stop it."

Despite the pain it has caused the top teams, who have had to make redundancies to stay below the limits, they also agree that the cost cap was the right thing to do. The key is simply ensuring it works fairly for all.

Mercedes boss Toto Wolff said: "We have decided to go down the way of the cost cap and that we want to give smaller teams the opportunity to fight with the big boys.

"So we have been obliged to restructure our businesses and take tens and tens of millions of dollars out in order to fit the cost cap, to make the smaller teams competitive.

"I think the whole purpose of the exercise was that we are all under the same umbrella, and that it doesn't become an accounting championship that we are trying to push holes into. It's against what we have all committed to."

Toto Wolff, Team Principal and CEO, Mercedes AMG

Toto Wolff, Team Principal and CEO, Mercedes AMG

Photo by: Simon Galloway / Motorsport Images

Even for Red Bull, which has been angered by rivals pointing fingers at it, how the process unfolds from here is something it is intrigued to find out, as it also fully backs the cost cap despite the sacrifices it has had to make.

Horner said: "I think it is a positive thing that is going on in Formula 1, and it has had a direct impact on costs.

"I heard numbers of up to 40 people being made redundant from one of our rival teams. At Red Bull we've made over 90 people redundant, and the cost control that has gone on has been absolutely stringent throughout the organisation."

He added: "I think that it is something that the FIA can police, but inevitably there are going to be learnings and we're seeing clarifications that are coming out, even subsequent to when the submission has been made, that could have a material impact on the actual submissions that were made back in March.

"So, of course, there is always going to be a process of a learning curve, both for the regulators and for the participants."

That's why F1 is so eager to find out just what comes out of the FIA's Paris headquarters on Monday.

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