Item 8 is the Qualifications Wales (Monetary Penalties) (Determination of Turnover) Regulations 2019 and I call on the Minister for Education to move the motion. Kirsty Williams.

Motion NDM7026 Rebecca Evans

To propose that the National Assembly for Wales; in accordance with Standing Order 27.5:

1. Approves that the draft Qualifications Wales (Monetary Penalties) (Determination of Turnover) Regulations 2019 is made in accordance with the draft laid in the Table Office on 12 March 2019.

Motion moved.

Thank you once again, Deputy Presiding Officer. I move the motion to approve the Qualifications Wales (Monetary Penalties) (Determination of Turnover) Regulations 2019. The titles don't get any snappier, do they? [Laughter.] The regulations will allow Qualifications Wales to impose a monetary penalty where recognised awarding bodies are non-compliant with regulatory requirements. This will give Wales a stronger and more robust qualifications system in which we can all continue to have confidence. It addresses a gap in Qualifications Wales's range of sanctions. 

The Qualifications Wales Act 2015 established Qualifications Wales as the independent regulator for non-degree qualifications in Wales and provides Qualifications Wales with the power to impose a monetary penalty on an awarding body that it regulates for non-compliance with its standard conditions of recognition or other regulatory requirements.

The Act provides that the amount of the penalty is to be determined in accordance with regulations made by the Welsh Government. These are the regulations we hope to make today, which are intended to limit the range of financial penalties Qualifications Wales may impose on the bodies it regulates. Until these regulations are made, Qualifications Wales cannot exercise their powers to impose a monetary penalty.

The regulations cap any monetary penalty imposed by Qualifications Wales at 10 per cent of an awarding body's total UK turnover in the financial year preceding the issuing of the monetary penalty notice. The regulations also set out how Qualifications Wales will determine the turnover of an awarding body for the purposes of the cap. 

Last year, we set out our intention through a consultation exercise to allow Qualifications Wales to impose such a monetary penalty. In order to be consistent with Ofqual, the English qualifications regulator, and other regulators, I believe 10 per cent of an awarding body's UK turnover is an appropriate upper limit for such a penalty. This upper limit is not new, but a long-established principle, and was the upper limit when the regulation of qualifications was undertaken by the Welsh Government prior to the establishment of Qualifications Wales in 2015.

I would like to take this opportunity, Deputy Presiding Officer, to thank the CLAC committee for their useful contribution to the work on these regulations. Monetary penalties are a significant sanction that will only be considered if other actions to prevent or, importantly, to mitigate an adverse effect on learners has been insufficient. As long as awarding bodies remain compliant with regulatory requirements and protect the interests of learners, they should not consider themselves to be at risk of monetary penalties. And, therefore, I would ask Members of the Chamber to approve these regulations this afternoon.  

Thank you. Can I call on the Chair of the Constitutional and Legislative Affairs Committee, Mick Antoniw? 

Thank you, Deputy Llywydd, and I just remind the Chamber that one of the functions of CLAC is to scrutinise the constitutional efficacy process and procedure, which sometimes means our reports are not necessarily the most exciting of reports, but are relevant in terms of the approach to scrutiny of what is important legislation.

We considered these regulations at our meeting on 25 March and reported on 28 March. We considered the Government’s response yesterday. We noted a technical point about the potential lack of transparency about the use of the word 'month' in the regulations. While the meaning of 'month' is the meaning given in the Interpretation Act 1978—that is, a calendar month—that may not be of great use to many readers of these regulations. And the draft report notes correspondence between this committee and the Counsel General last year, where it was agreed that the use of footnotes to expand on the meaning of certain important terms would be useful, but there's no such use of a footnote in these regulations, which could have helped clarity and transparency.

In its response, the Government sets out its view as to why an amendment to address the technical point is not considered necessary. The first of three merits point notes that the regulations allow Qualifications Wales to set monetary penalties, subject to a cap and subject to reasonableness and proportionality. Our report draws attention to our report on the Qualifications Wales Bill and that the explanatory memorandum that accompanied the Bill states that the Assembly will have

'the opportunity to debate and scrutinise the amount of the penalty'.

However, the regulations give Qualifications Wales a wide discretion as to the setting of monetary penalties, leaving little for the Assembly to scrutinise as to the actual level of those penalties. The report also notes the position in England, where the extent of Ofqual's discretion is set out on the face of primary legislation, and not in subordinate legislation.

In its response, the Government indicates that the regulations reflect a policy choice, and that the Assembly is being provided with an adequate opportunity to scrutinise the way in which the penalties will be set.

The second and third merits point note concerns that were raised during consultation about the potential for both Ofqual and Qualifications Wales to impose financial penalties on the same organisation, and the potential for confusion as to what factors Qualifications Wales is likely, or will, take into account when making monetary penalty decisions.

The Government response notes the second point, and helpfully indicates that the explanatory memorandum will be revised to address our third merits point.

As a member of CLAC, I wasn't actually present when this investigation was made, but I did want to add something to it, in as much as this figure of 10 per cent that is included in the regulations, about how that figure was reached. Now, I heard you, Minister when you said that Ofqual has said that this is a suitable figure, but I'm still no wiser as to why Ofqual thinks that's a reasonable figure. And I raise it in particular because I'm not aware of any consultation on this particular figure or, indeed, any understanding of the practical implications that would affect a body that was not in compliance with the conditions in which it was permitted to be an awarding body.

And if I just take the WJEC as one example, although I realise, of course, other bodies may be affected: their turnover last year—and I'm not sure if this includes value added tax, but it's a good indicative figure—was in the order of £45 million, whereas their net income or their profit was in the order of £2 million, which is half of half of 10 per cent of its turnover. So, while I agree that a maximum penalty should be pretty stiff, it also needs to be practical for anybody to be able to pay it. In those particular circumstances, I find it difficult to see how a body in those circumstances would be able to pay it.

It also needs to be proportionate to the breach and it's a point that Mick Antoniw has already raised, as Chair of CLAC, with you, because—what can I say—I foresee judicial review of the quantum of any penalties if Qualifications Wales isn't furnished with some sort of guidelines to help them assess what is 'appropriate', as that's the word in the regulations. There's no steer in these particular regulations, unlike those in England, and I'm unaware of any contemporaneous guidelines that are being drawn up or due to be published. Now, if there are any, of course, I'd be very pleased to hear about them.

So, while we have no issue at all with section 38 itself, or these breaches of conditions—particularly in an environment where there's very little competition, those breaches must be deterred—but as the regulations stand, I don't think we have sufficient information on how the figure of 10 per cent of turnover was reached, and nor do we have any assurance on how lower penalties will be decided to be reasonable and proportionate. In those circumstances, I'm afraid we will not be supporting this regulation. 

I call on the Minister to reply. 

Thank you very much. Can I thank both Members for their contributions? Suzy Davies, on behalf of the Conservatives, says that she is not aware of any consultation with regard to the figure of 10 per cent. Well, last year we went out to consultation on an upper limit of 10 per cent of an awarding body's annual UK turnover. And in that consultation, we also sought to define what constituted turnover.

The consultation exercise took place between October 2018 and January 2019. Qualifications Wales regulates 104 awarding bodies. There were 13 responses to the consultation, eight of which were from those awarding bodies. So, that's eight out of the 104 awarding bodies that Qualifications Wales works with who felt the need to respond to the consultation. Members also asked about the rationale around the 10 per cent. This was proposed for reasons of consistency and transparency and continuity across a regulatory system that people are working in in both an English and a Welsh context.

Now, some awarding bodies who responded to the consultation exercise felt it would be possible to separate out revenue generated from business in Wales, and consideration has been given to those issues and whether the 10 per cent should include regulated activity only. But, of course, these bodies maintain an income not just from regulated activity. I believe that it is helpful to be consistent with Ofqual and that 10 per cent is an appropriate limit. It is a significant amount of money to impose upon a regulated activity. But let's be clear, this is about the protection of learners and to ensure that there are safeguards within our qualifications system that are as robust as they can be. I will make no apologies for trying to protect the interests of learners by ensuring that our qualifications bodies have these powers. At the moment, there is a de minimis process or there is the ultimate process of simply de-registering or stopping somebody's activity. This gives us an opportunity to provide a middle way with sanctions, but it is potentially serious. But as I said in my opening remarks, if a—[Interruption.]

Thank you for taking the intervention, Minister. Yes, I don't disagree with you at all that Qualifications Wales should have appropriate powers in this regard, it was just the lack of information and evidence supporting the figures you've chosen in particular. While I hear what you say about the qualification in England—sorry, that's my earlier mistake. It was Ofqual—I was right, hooray—that doesn't really tell me very much about the remainder of the public sector, where similar breaches of regulatory compliance will also produce penalties, but I've no idea how these compare to those, for example. 

My job is to ensure that there is consistency across the qualifications sector and the regulations of that particular sector, and we're seeking to maintain that by mirroring the situation across the border in England. 

The Member, quite rightly, raises concerns about actually how this will work in practice. Before imposing a fine, Qualifications Wales must give notice to the awarding organisation concerned, setting out the reasons for the proposal and giving the body the opportunity to make representations. Qualifications Wales must also have regard to these representations, and if it still intends to impose a monetary penalty, it must set out the reasons for doing so, including the details of the awarding body's right to appeal that decision.

There is a first-tier tribunal, which will be in place to ensure that there are effective checks and balances within the system, and the regulations set out overall parameters that it is Qualifications Wales's responsibility as a regulator to place an appropriate level of monetary penalty that is proportionate.

I'm sorry that the Conservatives feel that they are unable to support these regulations today. I believe it strengthens our qualifications system and gives appropriate powers to the independent body that this Assembly has decided to entrust with our qualifications system, and I commend the regulations to the Chamber.

Thank you. The proposal is to agree the motion. Does any Member object? [Objection.] Therefore, I defer voting under this item until voting time.

Voting deferred until voting time.