The details of the Budget cap have been released by the FIA.

It will start next season. The level has been set at £40 million with no ‘glide path’ from a higher figure to a lower one. It will present teams with an obligation to lay off a significant number of people quickly, which in itself is an expensive exercise.

The FIA has maintained the idea of a two tier championship, with teams able to spend more if they wish to, but the cost controlled teams enjoying greater technical freedom. This will greatly annoy Ferrari and BMW.

The FIA statement reads as follows:

“From 2010, all teams will have the option to compete with cars built and operated within a stringent cost cap.

The cost cap for 2010 will be £40m per annum*. This figure will cover all team expenditure except:

– Marketing and hospitality;

– Remuneration for test or race drivers, including any young driver programmes;

– Fines or penalties imposed by the FIA;

– Engine costs (for 2010 only);

– Any expenditure which the team can demonstrate has no influence on its performance in the Championship

– Dividends (including any tax thereon) paid from profits relating to participation in the Championship.”

Drivers being excluded will drive up their wages. But these may fall under the budget cap in future years. Engines being excluded means an additional £5million for customer teams and allows the manufacturers some latitude in reshaping their engine departments. Many will be providing customer engines to teams.

The whole plan is aimed at attracting new teams to the series and the field has been increased to 26 cars, so 13 teams can get an entry. Bernie Ecclestone has agreed to give the new teams a share of the prize money (normally they would have to serve a couple of years before getting anything)

“In addition to the payments which it already makes to the top ten teams in the Championship, Formula One Management, the commercial rights holder, has agreed to offer participation fees and expenses to the new teams. This includes an annual payment of US$10 million to each team plus free transportation of two chassis and freight up to 10,000 kg in weight (not including the two chassis) as well as 20 air tickets (economy class) for each round trip for events held outside Europe.

“To be eligible for this, each new team must qualify as a “Constructor” and demonstrate that it has the necessary facilities, financial resources and technical competence to compete effectively in Formula One. ”

The technical freedoms the capped teams may enjoy are as follows:

“1. Movable wings, front and rear.

2. An engine which is not subject to a rev limit.

The teams will also be allowed unlimited out-of-season track testing with no restrictions on the scale and speed of wind tunnel testing. ”

To put pressure on the existing teams to comply , the FIA has said that entries must be in soon,

“Applications to compete in the 2010 FIA Formula One World Championship are to be submitted to the FIA during the period 22-29 May 2009. Teams must state in their application whether they wish to compete under cost-cap regulations. ”

The team’s association, FOTA is meeting in London on May 6th. Their response will be very interesting, with Ferrari particularly furious.