Its a rule that's completely at odds with itself. How can you have innovation and development when you limit spending to a figure lower than most low end teams are currently struggling to survive on?
If Sauber don't have enough money to be innovative with the current strict rules, how are they going to suddenly find the funds to be more innovative when they have even less to spend? The plan would just create half a grid of Marussias and HRTs, teams that build a basic, safe, conventional car and then hardly upgrade it at all throghout the season.
Its a bizzare suggestion from a crazy old man. Fancy that!
It's not quite as silly as you think. Within a strict set of regulations there is effectively a perfect car that will have the perfect aero setup because there isn't enough room in the rules for 10 different equally good aero designs, there is just one. When you have one type of car then how to get there is through iteration, it's as simple as that. Hundreds of guys making one wing, then 5 other wings with small changes and seeing which is the best. You can get close relatively easily but then getting the absolute best takes huge money and a lot of resources.
Now if the regulations are much less strict, you have far more variance in what would be a good design, effectively think of it like Brawn, if you had half the grid that year unable to do a double diffuser due to being over a budget gap, then half the grid would be doing the ultra expensive iteration method of design, and half the grid would either copy the double diffuser or have their own potentially great new killer design feature.
Ultimately in strict rules Mclaren, RBR, Ferrari, Mercedes can afford to copy any good idea then redesign it over and over till it's perfect while Sauber/FI have more of a design it once and then try and improve it once more for next year design philosophy. Big budget WILL win that EVERY time. Brawn had a good and expensive car underneath it and one killer concept but it was a car completely outmatched in the second half of the year as the big budget teams copied then perfected it, had they gotten there a couple races earlier Button wouldn't be a champion.
So what you might have is a grid with the current big teams the same, but every year all the small teams could have one new feature, a flexible wing, a double drs, depends on where and how they'd relax the rules.
However it's also risky as ****, if one of the smaller budget teams builds something outrageous and it failed... they'd lose so much in constructors money it's a pretty big gamble to make. Sauber have a car that is generally most years a bit better than the previous one and come in a relatively similar constructor position, even last year was financially a disaster and led to all kinds of crap this year with paid drivers. put the money into one killer feature, it might launch you to the front like Brawn, or it could lose you 30mil of constructors money when you finish behind Manor.
One potentially interesting twist to such rules would be, well Newer is effectively giving up F1 because it's become boring to him, the small teams can't afford the best guys and the best guys have nothing to gain for taking less well paid jobs. From a creative/design perspective, if the big teams were just doing the same boring move towards very similar cars while the small teams have a chance to come up with something revolutionary every year... would you see Newey take a job at Sauber and come up with something special?