More than ever before Formula 1 racing would benefit from a budget cap. Those who argue against such an idea are simply protecting vested interests, or at least they think they are, as they probably have more to gain from saving money, rather than trying to win cash.
The current situation, in which the Formula One group takes more than half the money out of the sport, makes it is illogical to spend to win, rather than saving to create profit. There has never been a doubt that those that spend more money can gain an advantage in F1, if they know what they are doing. There has also never been a doubt that engineers will spend all the money that they are given – and always ask for more.
But that does not make for good businesses… Just as purist attitudes do not make for better races in the modern era.
What does make sense is cost-control, to stop money being spent on things that are utterly useless, and budget caps to restrict the cash that is eaten up by F1 at a time when sponsorship money is not easy to find. There are still some team owners who race because they love it; others are on massive ego-trips. More and more are looking for value in the business.
There is no doubting that F1 would be far healthier if the teams were all profit centres and any changes of ownership were because of potential profit, rather than the previous owners running out of cash. This would create brilliant win-win situations with big companies who could use the sport to promote their products, and at the same time make a profit from the racing. That would mean that every F1 “franchise” would have more value than it does today. There are only 12 of them and there are plenty of big companies that might decide to get involved in F1 if the sport created profit, gave them what amounted to free publicity and created technology that was actually useful.
The idea of a budget cap is not new. Ford’s motorsport boss Richard Parry-Jones suggested in 2004 that a system of budget-capping was the way to go.
“It’s unrealistic,” said Jean Todt, then at Ferrari.
“Impossible to police,” said McLaren’s Ron Dennis. “I just totally and utterly disagree with it. It’s an absolutely unpoliceable proposal.”
“It’s competition to get the best deals and we fight each other fairly, in the commercial world, like all companies do,” said Frank Williams.
Tony Purnell, the boss of Jaguar Racing, disagreed.
“I like the idea because it makes the cleverest, most efficient company win, rather than just money muscle.” he said.”It would make it a very interesting business and technical exercise to try and do the best job on a fixed budget. It would certainly revolutionise the sport. I don’t see it to be as difficult to police as people imagine.”
Whatever the arguments, the idea died a death. FIA President Max Mosley tried to revive it a few years ago, but he ran into other troubles before the plan could be introduced.
In recent days the F1 teams have managed to reach an agreement on cost control with 80 percent of the teams saying they are in favour. That was necessary before June 30, after which unanimous agreement is needed for changes to next year’s rules. No document has yet been signed by the team’s agreed and that was minuted at the last meeting of the Sporting Working Group.
We hear that a proposal for a budget cap is coming which would restrict budgets to something like $175 million in 2013, $150 million in 2014 and $120 million in 2015. This would not include drivers, marketing or administration costs and would be independent of cost control ideas relating to powertrains. The latter would need separate agreements, but this would be a self-policing system as it would involve car companies not just messing about in racing, but rather using their core competences. There are two things to be gained from such a system: the first is that multinational car companies dare not be caught cheating on such things; and secondly they could use their success for advertising, showing that they won races when everyone had the same resources. It is worth reflecting that the car industry used to be deeply opposed to crash-testing, but today uses it to sell vehicles. F1 could be the same.
There are still people who argue that it cannot be policed, but they do not understand the concept of forensic accounting. An FIA-enforced cost cap, administered by a global accounting firm, would encourage more teams and manufacturers to enter the sport.
Ultimately it might be better for the teams to work together to control the commercial rights of the sport. They are incapable of doing that, so the next best thing is to create more value for everyone.