In the search for a more exciting battle between the 10 Formula 1 teams, the financial regulations were created in 2021.
The rules dictate that the teams are only allowed to spend a certain amount per year, with of course some exceptions. In 2021 that started at $145 million, followed by $140 million in 2022, and in 2023 that has decreased to $135 million, plus an increase of $1.2 million owing to additional races.
The teams will submit their figures for each season at the start of the year for the previous season, after which the FIA will audit the teams accounts. In 2022 this came in October, when the results showed that Red Bull had went over the cost cap and committed a minor breach.
A penalty followed: a seven million dollar fine and a 10% reduction in aero development time (wind tunnel and simulations) for one year.
Both the former Ferrari team boss Mattia Binotto and now his successor Fred Vasseur have reached the same verdict on Red Bull's punishment: That the penalty was too light.
"I am still convinced the penalty was very light," Vasseur told media, including RacingNews365.com.
"If you consider that we will improve a bit less than one second over the season in terms of aero, [if] you get a penalty of one tenth of this, it is [equal to] 0.1secs.
"And as it is not a linear progression, it is probably less, and as you are allowed to spend this money somewhere else, on weight saving and so on, for me the penalty is marginal."
But did Red Bull really escape a severe penalty? We take another look at the case.
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Looking only at the offence
The penalty went into effect immediately last October/November, and so Red Bull has now been disadvantaged by the penalty for six months.
As the remaining races of 2022 and start of the 2023 season have shown, they don't seem to be affected by it as their lead over rivals Ferrari and Mercedes seems to have merely increased. However, there are a lot of different reasons for this.
The penalty is only applied to aero development for this year, which means it has not impacted the resourced they used in 2022 to develop the RB19. Such a restriction, coupled with the new 'sliding scale' wind tunnel rules which work based on your championship position, is more likely to affect their 2024 car and beyond.
Could the FIA impose a more harsh penalty based on how far ahead of the competition Red Bull is?
No, because the penalty only applies to the nature of the financial breach. Had Red Bull significantly exceededr the cost cap and committed a 'major breach' of the regulations, there would have been a far worse penalty that could include anything from a points deduction to exclusion from the championship.
First year, first offence
It would have been a slightly different story if Red Bull were repeat offenders and committed a second financial breach. But 2021 was the first year of the new regulations, and their infancy was something that team boss Christian Horner pointed out earlier in the season.
"We understand that this set of new rules is very immature. We accept that there are different interpretations. We accept that the current FIA board inherited these rules from the previous board. Therefore, there is a lot of work ahead in the future," he said at the time.
"If you look at the amount of speculation, all the reactions and all the sneers that have already been handed out in the paddock, we are convinced that it would be better for everyone, for F1 and for the FIA that we would close this chapter here and now. We accept it."
However, there had been a preparation period in 2020. A year before the teams' finances were officially audited in a 'dress down' period, where they could send their finances to the FIA on a trial basis to detect possible issues, problems or raise ambiguities before the rules were finally introduced.
Horner claimed they used the same methodology with their 2021 submission: "We didn't get any feedback [at the time], so therefore from the perspective of our auditors we did the same with the figures we had to submit after 2021. So the same methodology was also used with the figures we submitted in March 2022."
The communication between the FIA and Red Bull left much to be desired, however the governing body determined that Red Bull acted in good faith rather than attempting to cover up any mistakes.
While this would not have been the case and Red Bull had tried to withhold certain things, a heavier penalty would certainly have been in order.
Red Bull's offence was minimal in the end, occurring in four key areas. The team thought it had been four million dollars under the budget, but it ultimately turned out to have overspent by $1.8 million.
Of the overspend, $1.4 million was due to a His Majesty Revenue and Customs rebate in the UK that the team did not receive in 2022.
"A certain amount of tax, of 1.4 million, we had not excluded from the cap, when we could have. If you take that into account, instead of 1.8 million, our offense becomes just over 400,000" said Horner.
The team was fined for going 5% (which was equivalent to $7 million) over the cost cap, which meant the FIA handed them a $7 million fine along with the 10% wind tunnel time reduction.
However, in theory, Horner's team was only technically 0.37% over the cap - a harsh fine when you think about it.
What could be done differently?
There is somewhere something to be said for Ferrari's complaints when you consider Red Bull's punishment. But of course that is not the fault of Verstappen's team.
That a team can theoretically has a seven million dollar safety net before it is considered a "major breach" [or serious offence] might be an issue for the future.
It is also odd that violating the budget cap, accidentally or not, does not result in less budget in the following year. Red Bull has a large enough revenue streams outside of F1 to pay the seven million dollar fine, so why not penalise their ability to spend?
That way, such a fine would also weigh more heavily according to the severity of the offense. Now Red Bull can actually just use the money not spent on the wind tunnel in other places due to the development penalty.
Another aspect that might be missing is a suspended fine or penalty in case Red Bull breaks the rules again. Knowing that you will get an even heavier or harsher penalty next time should deter and ensure that it doesn't happen again. After X number of seasons, the suspended penalty could then be dropped.
The saga should serve as a learning experience for the FIA and teams
Yes Red Bull's punishment is light on paper. However, whether it is too light, as Vasseur claims, is another story entirely.
Yes, in hindsight the punishment was too light to have any real effect on the well-oiled machine that Red Bull is at the moment, but punishing more heavily because the team is running well should be a deterrent for F1.
At the same time, the offense was also light, especially when you look at the regulations, which state that a budget cap overrun of up to $7 million (on a budget cap of $140 million) is still a light offense. However, a budget cap violation of $400,000 (or even $1.8 million if you don't include the tax story) is a minor offence.
The saga should likely serve as a learning experience for the FIA and the teams to refine the financial regulations for the future, to ensure more weighted penalties are handed out in the future.
Balve Bains is joined by RacingNews365.com Editorial Director Dieter Rencken and Asia Correspondent Michael Butterworth to dissect the key talking points from the last week in F1.