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Talks on driver salary cap continue

NEWS STORY
04/06/2022

As a number of teams seek to have the budget cap raised, talks over the inclusion of drivers salaries in the budget limit continue.

Though Christian Horner has since clarified his 'threat' that in order not to exceed the budget limit some teams might need to 'sit out 'races, the push for a relaxation of the rule from the bigger teams continues.

However, in the midst of the wailing at the need to spend more money, it is worth remembering that a number of important items are not included in the cap, which currently stands at $140m.

These include driver salaries, not just the lead driver but both race drivers and a reserve driver, the salaries of the three highest paid employees and all marketing activities.

Indeed, as Christian Horner cites the 'cost of living crisis', it's worth noting that "electricity, gas and water costs incurred in the course of both F1 Activities and Non-F1 Activities" are not included, likewise "All Property Costs", "All costs Directly Attributable to Human Resources Activities, Finance Activities or Legal Activities", "All Employee Bonus Costs, subject to a maximum amount in any Full Year Reporting Period", and so on...

As anyone who has played Fantasy F1 will be aware, not having to include the salaries of ones drivers, team boss or technical director essentially gives you free rein to splash out on your chassis and engine.

However, talks on capping driver salaries continue.

"That's a point we started discussing a month ago together with all the teams, F1 and the FIA," says Mattia Binotto. "We understand the importance to try somehow to cap the overall expenses. Obviously, there is not only the three top, let me say, key personnel in the team, there is not only the drivers, there is the engine and the power unit as well, for which there will be a budget cap in the future.

"So, we are discussing it, there is not a straightforward solution, especially for the drivers' caps on the salary, for drivers' salary cap. But no doubt that we are discussing it and trying to understand what can be a solution.

"It will not be in the short term," he admits, "the reason for that is we already have contracts in place, and we cannot simply breach them. There are legal implications, certainly to understand how to do that, so it's a discussion. It's an important one, we understand it and we recognise it will take time, but certainly we will go through the process."

"The principle of a cap is well merited," agreed Christian Horner. "I think the application of it is tricky. And we're seeing and we're experiencing that at the moment.

"Of course, there's an awful lot of things that need tidying up within the existing cap that we have, that's being rolled out to being an engine cap as well. I mean, there's all kinds of complications with that, again, with companies' reporting structures, etc, etc. So, there's many, many complexities, but I think we need to go beyond that.

"Personally, I think, too much weight and pressure is being placed on the cap at the moment. I think you've got to look at where your cost drivers are. And I think as Formula 1, we need to do a better job at looking at technical regulations, sporting regulations, because we're still designing and manufacturing very expensive cars.

"The engine regulations for 2026. There's nothing cheap about them. And I think this is what then puts an artificial pressure on the financial regulation.

"We're going to end up more with more people in our financial department than we have in the drawing office. And what we don't want to see is that Formula 1 becomes an accounting world championship, you know, rather than a technical or sporting one. And I think that we've just got to get that balance, right, and just look at revisiting some of the fundamentals, you know, of why does it cost so much to build these cars?"

"There's no doubt that a well thought out cap can benefit the sport," says Andrew Shovlin. "And those are all areas that we're looking at to be brought into it in the future and they've got to be workable.

"But if you look at the situation we've got right now, the chassis-side cap came in, and it isn't... At the moment it's very difficult to see how that's going to be workable in the in the current climate.

"So while they're very useful topics and on the agendas for very good reason, it is the immediate problem that is the one that... We need to prove that we can have a cap that works for the teams for the sport. And from my point of view, that would be the priority."

"This will probably be the next topic on the table," says Alfa's Frederic Vasseur. "It has to come together between drivers and key personnel for sure.

"I think it's the right approach to try to coordinate it with the budget and to have perhaps an allowance for this. You could overshoot the limit and you will have to take part of your budget cap, I don't know, but we have to find something like this because it's important for the sport.

"I think at the end of the day that it makes also sense for the competition," he adds. "I'm more than pleased to go into this direction.

"F1 is in a very good shape today; it's in good shape because the show is going up and also because the FIA and the FOM took the right decisions in the last couple of years but I think that we have to continue into this direction."

"I'm in favour of adding that underneath a global cap," agrees Otmar Szafnauer, "so that the teams can trade off, you know, driver skill with updates, because ultimately both things bring performance on track. And I think for us to have the latitude to be able to trade that off is probably the right thing.

"Our position is that everything which is performance relevant should be considered to be in a kind of a cap or allowances and that's why we're open for that discussion, as well," added Andreas Seidl.

However, in English Premiership Rugby, a number of teams are alleged to have sought to get around the player salary cap in various ways, be it paying them in cash or even getting involved in joint property and company investment deals.

Consequently, in F1, in terms of drivers and key personnel, there remains the question of how a cap would be policed, especially with drivers who have personal sponsorships that they bring on board a team.

"There's enough examples around from other sports that this mechanism that could do the job," says Seidl. "At the same time, I think it's important now to simply keep continuing the discussions behind closed doors, because there's no point to now in public discuss how could that all work? So let's stay tuned."

"Other sports have implemented this," adds Szafnauer, "and we should take some learnings from them and take our time to make sure that it can be policed and we stick to the cap when it does come in.

"But yeah, like we said, it should be a next step and we shouldn't rush into it but make sure that, you know, we have good methods in place to be able to police it and also have it be a fair cap."

"No, it took 20 years to put the budget cap in place that I hope that will be a bit faster on the second point," argues Vasseur, "but we just have to open the discussion between us and I'm sure that we'll find a compromise."

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READERS COMMENTS

 

1. Posted by ChickenFarmerF1, 06/06/2022 22:40

"@Spindoctor - reminds of the birthing scene (first world) in Meaning of Life. "

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2. Posted by RP, 06/06/2022 13:05

"I always liked the "team" in Formula 1 because it is more than the driver's themselves and everyone has to work. Put Max in a Williams and you will get about what George Russell produced. IF you're going to cap salaries, I would start with Team Principals and engineers. Perhaps Adrian Newey would enjoy being paid the same as the other designers.
Or, perhaps, just reverse the order of prize money payouts so the weakest teams could have the funds to improve and the strongest could admire their own trophies. "

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3. Posted by Spindoctor, 06/06/2022 10:00

"@Max Noble - Precisely and in one!

Example of how Accountancy can be used to hide expenditure:
In UK some years ago the then "Labour" Government of Tony Blair promised to "control Spending. In order to carry-out a few of their other electoral promises & circumvent this they invented a Private Finance Initiative (PFI). They borrowed the cash from private companies to be repaid over decades. At a stroke all the money they spent on rebuilding schools & hospitals (etc.) was no-longer "Government" expenditure but "Private". I believe Oz had a similar scheme.
The irony is (in UK at least) that their "fiscal probity" is costing us taxpayers many multiples of the costs of the original projects!"

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4. Posted by Max Noble, 05/06/2022 23:38

"@Spindoctor - Quite, my thanks for remembering! :-) Yes, Horner’s note that they are going to end up with more people in the finance department than the drawing office made me smile. He is quite correct. It will end up like government contracting where seven people deliver the work, and fifty over see, and audit it…. Or in the case of Red Bull… they stop hiring drivers.. the drivers work for Honda, and Honda contracts “a driving capability” back into Red Bull at a fixed price… All inside the cost cap! While V. Max still takes home $$$$ from Honda…"

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5. Posted by elsiebc, 05/06/2022 23:34

"@USA1 It figures that someone from the United States would advocate for people being paid what they're worth rather than a government mandated value. (Kudos!!!) Skip the talks because there already is a driver's salary cap, it's what value the drivers bring to the teams. Hint: Mercedes doesn't pay LH more than what he makes them. A salary cap is just a way for the board to pocket more dough while saying "we'd really love to pay you more because you bring so much to the team, but our hands are tied. And if you go somewhere else and they pay you an extra 10 million, that's 10 million that they can't put into giving you a faster car since we all have the same budget now."
"

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6. Posted by USA1, 05/06/2022 13:13

"Cap should be for parts and the car for everyone the same, drivers and team personnel should not be included because some people make different wages than others, common sense if you better you earn more 👍"

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7. Posted by Spindoctor, 04/06/2022 14:46

"Another field-day for the creative Accountants. Max Noble of this parish has written pretty convincingly about the likely efficacy of this whole cost "cap" business."

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8. Posted by jo6pac, 04/06/2022 13:37

"There should be a cap on what pay drivers can bring to a team"

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