Honda F1 website

APRIL 28, 2008

Movement on budget-capping in Formula 1

While the political situation in Formula 1 at the moment is somewhat unstable as some of the players seem to be beginning to look beyond the current regime, particularly in the light of the weakening of the power of FIA President Max Mosley as a result of the ongoing sex scandal and his reaction to it.

Against this background it is hard to see how very much is going to be done in the course of the next few weeks, but we hear that one area that has not been affected is the discussion over budget-capping as everyone agrees that budgets need to be limited. With the goals established, the problem now is to ascertain how one measures the budgets involved (given such things as currency fluctuation), how high the limit should be and whether there should be margins for error. The policing is not considered to be a problem because Formula 1 now involves so many public companies that the risks to the main business of being seen to be caught cheating are such that no-one will do it. In addition there will be an element of self-policing as the movement of personnel between the teams means that any rule-bending will not remain a secret for long. The other point that is worth considering is that the FIA would have access to all public filings and might even work with the different tax authorities to ensure that the budgets stated to the FIA are the same as declarations made to tax authorities. One cannot therefore cheat on one without affecting the other. If a team spends more than it declares that would risk tax evasion investigations.

Accountants around the world are now used to having to adhere to very strict reporting regulations which have come along since the Enron Scandal a few years ago. These mean that budget reporting in F1 would not be anywhere near as complicated as some might think.