The repetitive Formula One story rolling from race to race revolves around the team cost cap. The bigger F1 teams agreed during Covid to just their annual spending limit form $170m to $140m but are now arguing it should be increased. Toto Wolff recently revealed the energy bill at Brackley has increased by $4m due to the global fuel inflation and staff are unable to be paid salary increases to cope with the cost of living crisis.
Not all teams agree the cap should be raised. Alpine management argue incremental savings can be found by spending less on in season development of the F1 cars.
Post the 2021 Monaco GP a variation on the theme emerged as the focus turned to the cost of driver salaries. The idea was first mooted in 2020 as the team spending cost cap was being finalised. Then a maximum figure of $30m was close to being agreed.
Lewis Hamilton and Max Verstappen are earning a reported $40m a year which is almost a third of what the team is allowed to spend on the entire F1 season’s expenses.
Driver salaries were eventually not included in the cost cap and in effect are ‘unlimited’. However when F1 team staff are being made redundant and taking net pay cuts, to some F1 critics this exorbitant spend on the drivers is rather obscene.
Toto Wolff entered the debate this week in a somewhat surprising fashion. Speaking on Saturday in Baku Wolff commented on the disproportionate nature of driver salaries in comparison the the total team spending allowance.
“Certainly it has come up as a controversial topic, we can see that we’re facing a very difficult situation in Formula 1 overall, the sport is booming and Formula 1 is earning more money and that is trickling down to the teams, but we have a cost cap,” said the Mercedes boss.
“We have $140million for 1000 people, with inflation, we haven’t even been able to pay the inflation. And I think the talk about [a restriction of]] $30-40million salary allowance is inadequate when you take that perspective.
Toto accepts, “now clearly drivers will have an opinion on that, and maybe as a driver, I’d say the same thing. But the US leagues that are the most successful in the world have introduced salary caps 15 years ago, it works pretty well over there.”
Toto Wolff’s addition remarks are striking. The Mercedes F1 team is now only owned 30% by the Stuttgart global auto manufacturer having sold half their share to Ineos Chlor. Clearly resources from the original German majority owner are reduced from the hay day when the team was acquired from Ross Brawn.
“Formula 1 is looking at it without an immediate solution to it,” Wolff continues. “But I think like all the other sports in the world, we need to find a way of how we can act sustainably and become independent from sovereign funds or state-owned teams.”
Others would add independence from global auto manufacturers is desirable as they spend fortunes to promote their own brand around the world. This disadvantages the smaller independent teams who historically have been the lifeblood of Formula One and don’t come and go as they please.
In conclusion Toto makes this stark contrast. “Therefore it’s certainly clear it’s going to be one of the main areas because you can’t simply have a [driver] salary bill in some of the top teams that is $30/40/50million when the rest of the team has to be divided by $140million.”
Netflix star and Haas team principal Guenther Steiner believes Formula One could “learn lessons from these American big-league sports” on how to limit the stars’ salaries.
“Having said that, they [the drivers] are tremendous superstars, they deserve to be among the top earners in the sport in terms of direct salaries.”
Steiner concludes ironically on the drivers being ‘top earners’ – “They already are.”
Only Major League Baseball of the big US sports does not have a player salary cap. However, the teams are issued with a ‘luxury tax’ if their payroll in total exceeds an agreed capped figure.
Including the F1 drivers in the team’s cost cap was discussed extensively, but is in effect dead in the water.
The NFL and NHL have had hard salary caps in place for a number of years.
Yet the most likely solution for Formula One would be along the lines of the NBA which allows cap breaches for particular agreed reasons.
Around two thirds of the players salaries are from commercial endorsements in Formula One the percentage is much lower as the drivers are predominantly paid by the teams.
An idea attracting attention is the F1 drivers could be paid a capped amount from external commercial arrangements. If they receive further remuneration from their team then this additional amount should be included in the capped team annual spending budget.
Interestingly Wolff has changed his tune. He and Lewis did a talking heads interview for sky back in 2018, where Wolff explained the huge value in advertising revenue Stuttgart were receiving from Hamilton and the teams ongoing success. The implication was that his star driver was worth every penny of his salary.
Now Stuttgart’s contribution has reduced, suddenly Toto is counting the pennies.