Since 2021, Formula 1 has operated under a budget cap, which currently stands at 215 million US dollars plus additional expenditure
Former Red Bull team principal Christian Horner has called on Formula 1 to raise the budget cap, which currently stands at 215 million US dollars. He claims that, despite the cost cap, the teams spend “500 or 600 million dollars” year after year.
Since 2021, Formula 1 has operated under a budget cap that limits how much a team is allowed to spend per season. The cap was initially set at US$145 million before eventually being raised to US$215 million.
However, this US$215 million does not cover every single expense incurred by a Formula 1 team. Driver contracts, the salaries of the three highest-paid staff members other than the drivers, travel costs and marketing expenditure, for example, are not included.
Many other items are also excluded. In addition, there is a separate budget cap of 190 million US dollars for the power units. Costs therefore remain enormous, despite record-high team valuations.
Horner, whose former Red Bull team had exceeded the 2021 limit by five per cent and received a fine of US$7 million as well as a ten per cent reduction in wind tunnel and CFD testing as a result, is therefore calling on Formula 1 to rethink the system.
“In the early years, we had to get used to these rules first,” he tells Autosport, explaining: “The things we were penalised for in that first year wouldn’t have been a problem today, or even as early as the second year.”
“So I think they’ve clarified a lot in the regulations. What I see now is that there’s a budget cap of just over 200 million dollars. But the teams are spending 500 or 600 million dollars,” says Horner.
A cap on everything with no exceptions?
He therefore calls for: “More areas need to be included in the cap. I think the limit on the engine side is a good thing as a comprehensive limit. It’s just a question of: at what level is it set?”
“Formula 1 teams spend as much money as they have. It’s like a balloon that doesn’t have enough air: if you push in at one end, the air goes somewhere else,” explains the long-serving Red Bull team principal.
“That’s why we’re now seeing drivers’ salaries that are significantly higher than before the budget cap was introduced. It’s about finding the right balance. And I don’t think any of these companies are running at a loss anymore.”
Horner emphasises: “Even the smallest team on the grid has a company valuation in the billions. Five, six or seven years ago, they would still have been regarded as loss-makers.”
“That has given the teams – or franchises – real value. The fact that a team like Haas or Williams has moved up the rankings shows this,” says the Briton.
At Williams itself, however, they are not particularly happy with the budget cap. Team principal James Vowles recently explained that the top teams benefit from it more than the rest of the field.
The Briton believes that his team is restricted in its spending on the car and staff costs because it is channelling this money into investments that fall below the cap.
However, teams such as Red Bull, Mercedes and Ferrari had already invested heavily in their facilities before the cap was introduced. They can now put the US$215 million directly into investments at the racetrack.
Formula 1 used to be “like a bucket full of money with a hole in the bottom”
Nevertheless, Formula 1’s budget cap has brought significant benefits. The teams are more stable than ever before. Force India was the last constructor to go into administration in 2018. “Before that, Formula 1 was like a bucket full of money with a hole in the bottom,” says Horner.
“You kept going as far as you could until the money ran out, spending a bit more than you actually had. We’ve seen many teams come and go. A budget cap has now brought about efficiency.”
“I still remember how much unused material we had at the end of a season before the budget cap, which had never been fitted to a race car. That amounted to tens of millions of pounds.”
“ Because of intellectual property rights, we didn’t want to let it go anywhere, nor did we want to destroy it. So the parts were simply stored in warehouses full of underbodies, wings and suspension parts – almost like a scene from *Raiders of the Lost Ark*!‘
’ With the budget cap, you no longer have that luxury. That’s why you’re much more selective about what you produce, how you spend your money, and how you use and utilise these parts,” explains Horner.
“That has brought real efficiency to the teams. Today, the accounts departments play just as big a role in Grand Prix victories as the design departments.”
“When I left, the accounts department was just as big as the design office. Because the financial rules are just as important today as the sporting or technical rules.”