THE world of Formula One is undergoing a period of upheaval. A raft of new technical regulations have been enforced, a team has quit because of its excessive expenditure, giants Ferrari and McLaren are struggling, and teams and the sanctioning body are at loggerheads.

And the revolution continues. From next year, a voluntary budget cap will be introduced. 

It is the brainchild of Max Mosley, the president of world motorsports' governing body, the International Automobile Federation (FIA).

Since the announcement last week, Ferrari have come out strongly to condemn the move, saying a cap on spending will hurt a sport which relies as much on constant technical innovation as it does on driver skill. 

There are rumours too that the Italian side could quit the championship. Over the weekend, Mosley went as far to say that the sport could survive without Ferrari, if the team does not adapt to the new rule.

Read between the lines, and it's obvious he's telling the 16-time constructors' championship winners that they are welcome to leave.

But step back from the fray and war of words, and Mosley's idea makes perfect sense. 

It is a matter of time before Ferrari - and any of the other big manufacturer teams like McLaren who have been spending hundreds of millions of pounds annually to compete in F1 - fall in line.

The way the cap works is simple. In exchange for keeping budgets to £40 million, teams would be allowed more technical freedom in designing their cars. This includes front and rear wings that will have movable parts, and engines without a rev limit.

If they choose not to abide by the cap, then they will continue under present rules that restrict engine performance and ban moveable wings. 

Yes, this could cause a two-tier championship between the "compliers" and "non-compliers".

But the message is clear: Comply or risk losing out to your competitors who are able to put a car on the starting grid for 18 races for that sum of money.

Would Ferrari dare continue spending tons more money than other teams, and at the same time run the risk of losing out to smaller teams operating on a leaner budget, but who have been able to take advantage of the rule and hence have faster machines?

Like any organisation, Ferrari have a board to answer to and will be hard pressed to find an explanation.

But they do have a point.

The budget cap is a jaw-dropping move for a sport that prides itself as the pinnacle of racing, where many teams have hundreds of workers toiling in state-of-the-art factories, doing incessant research all year-round in that quest to slice tenths of a second off lap times.

It means lesser innovation, lesser testing out of parts that could eventually make it to road cars.

But the cap is a step in the right direction, given that expenditures have been escalating alarmingly over the past decade and the world is in the throes of an economic recession.

Average F1 team expenditures in the 1990s were much less than £80 million, now it comes close to £300 million.

This is not sustainable in the long run, given that many team sponsors primarily consist of financial and auto-industry firms - who have been hit hard by the downturn.

The FIA have also made some concessions, the £40 million figure up from the £30 million originally announced by Mosley in mid-March.

And driver salaries are not included, so the likes of Lewis Hamilton and Kimi Raikkonen can carry on earning £15 million to £20 million a year. Also excluded are marketing and hospitality budgets, which can go up to tens of millions of pounds.

The FIA has also said the cap could also be adjusted from year to year depending on the state of the economy. 

So now, it is up to teams like Ferrari to make concessions of their own. Sure, a cap will cause redundancies and near-certain retrenchment of some staff - big teams have over 1000 workers, while smaller ones like Red Bull have only about 300.

But it would be better to shift towards a leaner operation now, than see the sport hurtle towards a demise of its own making.

Already, Honda have quit F1 because of the unsustainable spending. And the cap has helped ignite interest from new teams like Britian's Lola who are keen to join if costs are reduced.

The wake-up call this recession has provided should not go unheeded, even if you are a name synonymous with F1.