Awarding Organisations (AOs) and others involved in the awarding and qualifications industry have a few weeks left to respond to Ofqual’s consultation on the introduction of a ‘Principles Condition’ to its General Conditions of Recognition (‘GCOR’), the rules Ofqual imposes upon AOs it regulates. In this blog we consider the implications and what some positives and pitfalls might be for AOs.
- What is the Principles Condition and why might it be added to GCOR?
The Principles Condition would encompass six overarching principles which are (in summary): AOs must act with honesty and integrity (Principle 1), treat Learners fairly (Principle 2), ensure qualifications they offer are fit for purpose (Principle 3), maintain and where possible promote public confidence in qualifications (Principle 4), act in an open, transparent and co-operative manner with Ofqual and users (Principle 5) and take a pro-active approach to compliance with GCOR (Principle 6).
Ofqual says it is seeking to bring increased clarity to its framework, to ‘guide’ AO’s in complying with its rules. By doing so, it hopes the Principles Condition will enable AOs to ‘navigate new, unexpected and novel situations,’ by setting out ‘high level parameters’ within which Ofqual’s expects them to be operating, clarifying Ofqual’s underlying expectations of them.
- What is ‘principles based’ regulation?
Principles based regulation may also be referred to as objectives-based regulation. It focuses more on the desired outcome of regulation than the specific steps taken to achieve it. It is a common approach of financial regulators, particularly since the 2008 financial crash. More recently it has been adopted by Ofcom in its approach to online safety and the digital world. For example, Ofcom has made clear that so long as an online platform can demonstrate that it is complying with the principles of the regulatory regime, it has some discretion as to what measures it implements to achieve those outcomes.
By contrast, Ofqual’s approach is traditionally rules-based regulation, imposing prescriptive standards on AOs which may be critiqued for their specificity and burden. Ofqual’s contemplation of a Principles Condition may at first sight be interpreted as signalling a departure, but Ofqual has confirmed that the Principes Condition is not intended to replace other GCOR provisions.
- The positives and the pitfalls of ‘principles based’ regulation
Principles based regulation is generally preferred by regulators regulating dynamic, fast-moving sectors. It would be expected, for example, in any regulation of artificial intelligence. This is because in a sector which changes quickly (with new technologies, new opportunities, new risks) principles are more likely to remain relevant and effective tools of regulation than prescriptive rules designed to deal with known risks, which can become out of date or ineffectual. Regulators may also favour principles-based regulation because of the latitude it grants them in carrying out their functions – it might be possible to bring a whole manner of incidents or outcomes under the breach of a principle when it would be difficult to show breach of a very specific rule.
Ofqual appears to acknowledge that introducing the Principles Condition would afford them more flexibility pending any changes to GCOR (which were introduced in 2011): “where Ofqual determines that new or amended requirements are needed, the principles may still serve as an interim measure in advance of any more specific requirements being put in place.”
Some regulated businesses may also favour principles based regulation, since it generally affords them with more flexibility as to how they will comply with the regulatory regime and may be perceived as lessening the regulatory burden. The flip side, however, is that principles-based regulation can be less certain than prescriptive rules leaving scope for ambiguity as to what exactly is and is not expected.
In the case of Ofqual’s contemplated Principles Condition there are some uncertainties:
- would an event leading to an Adverse Effect attract regulatory action if an AO could otherwise show they are complying with the Principles?
- would an AO be required to comply with a specific provision of GCOR if it considered that taking some other step would more effectively meet the Principles Condition?
Stakeholders in the industry may have differing views on whether the introduction of the Principles Condition constitutes a positive step and that may depend on their position in the market. Small businesses and new entrants might think that the addition of the Principles Condition would add to the already complex regulatory landscape and make it more difficult – and costly – to navigate. This is notwithstanding the fact that Ofqual says that the Principles Condition has been designed to articulate expectations that already exist, albeit not explicitly, in GCOR. On the other hand, Learners wishing to complain about AOs might feel more empowered to articulate a complaint on the grounds of a breach of a Principle rather than a specific rule. And those AOs exploring the use of AI – a topic which GCOR to date has not adequately grappled with – will no doubt reflect on Ofqual’s statement that “The principles…. may support an awarding organisation to explain and rationalise to Ofqual the judgments it has made about how it has responded to these new or novel situations” and may decide that the Principles Condition provides sufficient parameters to implement more innovative use of AI in their businesses.
Louise Sivey, Senior Associate at Bates Wells, spoke at the 2024 FAB conference on this topic. With experience acting for a number of AOs, Bates Wells is well placed to help if you are considering responding to Ofqual’s consultation or have any concerns or questions arising from it.