Australia hoping to realise cheaper grand prix

The Victoria state government is hoping to be able to reduce the amount it pays to host the Australian Grand Prix each year in a bid to make the event more palatable for tax-payers.

Figures uncovered by a local newspaper have only served to fan the flames of annual concern over the amount of money being spent to stage the grand prix as, according to the Melbourne Herald Sun, the state is shelling out more than $30m a season under its current five-year agreement for the race in Albert Park. The fee is set to increase by five per cent with each successive event under the escalator system imposed by Bernie Ecclestone and Formula One Management, which handles race contracts.

The report claims to have seen documents detailing the escalation figures previously unreleased by state governments, and reveals that the fee for the race is set to rise from $31m at the start of the deal in 2011 to around $38m by its end in 2015. Last year's race cost organisers $32.5m.

However, with the existing deal having been agreed with a previous administration, new premier Ted Baillieu's government is hopeful that changes can be made, both to the fee and the cost of infrastructure, ahead of a new deal to keep the event beyond the end of its current term.

"The previous Labor government negotiated the current contract and it contains a number of clauses, such as an escalation clause which sees the amount of subsidy escalate each year," Baillieu's spokesman Paul Price explained.

"The government has previously said that, when we commence negotiations on the future of the grand prix, its retention will be considered in terms of the event's capacity to reduce costs and to offer value for money, and we will not be speculating on those negotiations."

The documents seen by the Herald Sun reveal that Ecclestone offered an olive branch in terms of reduced costs for the 2011 race, with a $5m in fees when a renegotiation was sought by the previous government. The report also claims that Ecclestone waived the additional cost of transporting equipment to Melbourne.

Australia will once again enjoy the prestige of opening the new F1 season, and the cost of hosting its event falls somewhere between the most expensive races, staged in new additions to the calendar such as Abu Dhabi and Singapore, and those to have cut special deals or managed to attract financial assistance from government, but former state premier Jeff Kennett insists that the amount is still less than that being paid for other high-profile events such as the Australian Open tennis.

"Over time, it has escalated, of course," he told the report, "That has happened under governments of both political persuasions but, compared to what we spend on the tennis or the desalination plant, for example, it is a very small sum of money."

"Our contract is a confidential contract, [and] I am not in a position to communicate the specific details," Australian Grand Prix Corporation chief executive Andrew Westacott added, "However, Melburnians have got to realise major events don't grow on trees. They cost a lot of money to stage."