13/02/2011
NEWS STORY
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It is the irony of all ironies. Despite F1's teams reacting so strongly to the FIA's proposal of a budget cap in 2009 that they threatened a rival series, we find out today that they are discussing introducing an equivalent system.
Writing in the Observer, Pitpass' business editor Chris Sylt quotes Red Bull Racing team principal Christian Horner saying that discussions by the Formula One Teams Association (FOTA) about a cap on all areas of spending are "heading in the right direction."
In 2009 FOTA vetoed the FIA's plans to introduce a £40m budget cap and instead came up with an alternative known as the Resource Restriction Agreement (RRA) which is currently in force. This limits areas such as staff numbers, size of computer storage space and the amount of days cars can be tested on track. However, it is far from comprehensive.
For example, although windtunnel usage is restricted, the amount can be increased if the team reduces its computer storage capacity. There are also significant exclusions from the RRA such as marketing costs and engine development which alone accounts for around £220m of annual spending according to F1's industry monitor Formula Money.
"We agree with restricting activity but don't cherry pick...let's do a transparent once and for all deal with this," Horner told Sylt. He indicates that this would be equivalent to a budget cap and when asked if there would be a difference between the two he said with a smile "that's a very good question."
The teams currently self-police that they are working within the spending limitations and Horner says that "the other major problem Red Bull Racing had with the RRA was that [other teams] wanted to introduce a penalty which just encourages infighting. The little teams see an opportunity to make some income and you end up with a situation of whistle-blowing. You can see it at the moment, it is putting the teams against each other which is not what FOTA was supposed to do."
Horner is most likely referring here to FOTA's current investigation of claims that Red Bull Racing overspent last year. Horner denies it overspent and says that "contrary to speculation, we completely adhered to the RRA within 2010." To maximise lead time, development work on F1 cars is done the year before they are introduced and in 2009 Red Bull Racing's costs increased 8.8% to £156.9m.
However, Horner says that "Red Bull Racing had their cheapest ever year in Formula One last year in terms of their net spend and that will diminish further this year. The RRA saved us a lot of money." He adds that winning the world championship has boosted the team's sponsorship income and it has "signed a couple of interesting deals which will be announced in the next couple of weeks."
The limitations of the RRA have steadily increased each year since it was introduced in 2009 and Horner says that "it has been a very good focus because now you have some financial regulations that have forced the teams to be efficient whereas previously there were inefficiencies I guess in all of them." If Horner's plans for more sweeping restrictions come into effect then F1's accelerating spending could become a thing of the past.