Red Bull and the F1 budget cap: What have they done wrong and what happens next?

Red Bull have breached the 2021 budget cap - but what costs are included in the cap and what penalty could be handed their way?

It is the story which everyone in F1 is talking about: Red Bull have been found guilty of breaching the 2021 cost cap.

We now await a punishment from the FIA - but what have Red Bull done wrong? Why was the cost cap introduced, what costs are included and what options are now open to Red Bull?

Here’s everything you need to know.

What is the F1 cost cap?

Formula 1’s cost-cap measures were brought in last year to reduce the lavish spending of big teams - sometimes upwards of $400million - in order to narrow the field and increase the competitiveness of the championship, enabling smaller teams to compete in an even environment.

The other key aspect was to be in keeping with F1’s target of sustainability, with the cap working to limit the amount of money an F1 team can spend in any year to encourage financial-sustainability.

In 2021, the cap was $145m (£114m) - and was originally reduced to $140m this year before an extra allowance of £5m was granted by the FIA due to: the season being 22 races long, the three sprint weekends and rising inflation.

Current plans are for it to be reduced further to £135m for 2023-205 but those figures are not confirmed, especially given the announcement of F1’s record 24-race calendar for 2023, with costs thus increasing for teams.

What is included in the cost cap?

Essentially, the cap covers all expenditure relating to car performance, including:

• All parts on the car
• All the elements needed to run the car
• Most of the team personnel
• Garage equipment
• Spares
• Transport costs of car

What is not included?

Everything not relating to car performance. Specifically:

• Driver salaries (Max Verstappen’s reported £40m-a-year salary, for example, would not be included)
• The wages of the three highest-paid staff members
• Travel costs
• Marketing spend
• Property and legal costs
• Entry and licence fees
• Any non-F1 or road car activities
• Parental and sick leave payments
• Employee bonuses and staff medical benefits

Max Verstappen’s reported £40m-a-year salary is not included in the cost-cap (AP)

What did the FIA investigate?

The FIA completed their analysis of every team’s 2021 financial submissions, submitted back in March, with a view to release certificates of compliance to the new financial regulations.

The findings, therefore, concluded which teams have spent under or over the cost cap.

The results were meant to be originally revealed in late-September, and a second deadline of last Wednesday was extended to Monday, when the findings were finally revealed.

What have Red Bull done wrong?

Red Bull are guility of a ‘minor financial breach’, meaning they have spent over the cost cap but under the 5% limit when a breach develops from ‘minor’ to ‘major.’

That 5% figure equates to roughly £6.6m ($7.25m).

While the specific figures were not revealed, reports state Red Bull have gone over the cap by £1m-£1.8m.

Red Bull - who won last year’s Drivers Championship with Max Verstappen as well as this year’s and are on the cusp of the 2022 Constructors’ Championship - are also guilty of a ‘procedural breach.’

Aston Martin are also guilty of a ‘procedural breach’ as were Williams, though they came to an Accepted Breach Agreement (ABA) earlier this year and paid a $25,000 fine.

The sport’s governing body found that Mercedes, Ferrari, McLaren, Alpine, AlphaTauri, Alfa Romeo, Williams and Haas had all complied with the cap limit.

Red Bull are guility of a ‘minor financial breach’ (Getty Images)

How have Red Bull responded?

Red Bull issues a strong statement after the FIA’s findings were revealed on Monday, saying they were “surprised and disappointed” with the results.

The team also insisted they had not spent over the budget cap, despite the FIA’s analysis.

The statement added: “We need to carefully review the FIA’s findings as our belief remains that the relevant costs are under the 2021 cost cap amount.

“Despite the conjecture and positioning of others, there is of course a process under the regulations with the FIA which we will respectfully follow while we consider all the options available to us.”

Red Bull team principal Christian Horner insisted before the results that he was “very confident” that the team had not spent over the cost cap limit.

Christian Horner insisted before the results that he was “very confident” that the team had not spent over the cost cap limit (Getty Images,)

What happens next?

Red Bull’s case has now gone to the Cost Cap Adjudication Panel who will decide a penalty.

The panel comprises a panel of between six and 12 judges elected by the FIA General Assembly. Penalties for a ‘minor financial breach’ comprise of financial penalties and/or a minor sporting penalty, including:

• Public reprimand
• Deduction of Constructors’/Drivers’ Championship points
• Suspension from one or more stages of a competition (excluding the race)
• Limitations on aerodynamic or other testing
• Reduction of the cost cap

The alternative option for Red Bull is to enter into an Accepted Breach Agreement (ABA) with the FIA.

While this would result in a softer penalty (including the removal of the prospect of a Championship points deduction), it would require Red Bull to accept at least an element of wrongdoing - which they are yet to do and show no signs of.

With the 2021 Championship having concluded over 10 months ago, the FIA will want this saga finalised as soon as possible but that largely depends on what route Red Bull decide to go down.

Verstappen beat Lewis Hamilton to last year’s title by eight points - but a points deduction is seen as unlikely given the breach was only “minor.”

News is not expected this week - in what has been a choatic fortnight for the FIA with two races in the Far East, confusion surrounding Verstappen’s Championship triumph as well as the cost cap drama - but we can expect updates and analysis ahead of next weekend’s US Grand Prix in Austin, Texas.