Formula One chiefs have announced a £40million budget cap and increased the limit on the number of cars in the championship to 26.

After proposing a £30m cap in mid-March, the FIA's World Motor Sports Council have added another £10m to that figure, with the formation of a new costs commission to police the regulation.

Although there are only 20 cars in the championship, FIA president Max Mosley and F1 supremo Bernie Ecclestone hope that by cutting costs they will be able to attract new competitors. The cap is voluntary although teams who apply it will be allowed to use movable front and rear wings and, most crucially, an engine not subject to a rev limit.

They will also be given unlimited out-of-season track testing, with no restrictions on the scale and speed of wind-tunnel testing.

The cap will not apply to marketing and hospitality, drivers' salaries and any fines and penalties.

Any team wishing to compete in next year's championship must notify the FIA before 29 May and state whether they wish to compete under the cost-cap. A further start-up bonus' for the new teams is that, as commercial rights holder, Ecclestone has agreed to offer participation fees and expenses to the new teams.

There will be an annual payment £6.75m to each team, plus free transportation of two chassis, freight up to 10,000kg in weight, as well as 20 economy-class tickets for each race outside Europe.

The costs commission will consist of a chairman and two other commissioners appointed by the WMSC for three years, who will be independent of teams.
Ecclestone, meanwhile, wants to halve the prize money paid to teams unless they sign a contract committing them to race.

The Concorde Agreement, which governs how the sport is run and the money divided, expired in 2007 and Ecclestone is frustrated that talks have failed to produce a new one.

In the interim, the 10 teams have agreed to a binding memorandum of understanding but Ecclestone is not satisfied.

“The teams want to be paid in the same manner as if they had agreed to be committed to race for five years but they don't want to be committed,” Ecclestone told the Financial Times. “They shouldn't get the prize money. You sign the contract and we'll pay you in full.”