Teenagers whose GCSE and A-level papers are graded incorrectly could collectively be awarded millions of pounds in compensation under plans that have alarmed the UK’s largest exam board.

AQA has suggested boards could face a pound;1m annual bill for wrong grades if proposals outlined in a recent consultation document become law. It said “some errors of judgement or process” were inevitable in grading and the move would open the litigation floodgates.

The reaction comes as part of the boards’ response to plans for Ofqual, a new independent exams regulator being introduced by the Government next month and which is due to become fully operational next year.

Other boards have also criticised the watchdog, questioning how it can achieve a greater distance than already exists between the current regulator and ministers.

The consultation on Ofqual said ministers were considering giving it powers to make “non-binding recommendations” to exam boards.

These could include compensating candidates for unspecified errors in the exams process. It would be modelled on the Office of the Independent Adjudicator for Higher Education, which has been considering complaints against universities since 2004 and has recommended compensation running into thousands of pounds.

AQA said: “Compensation to candidates or their families...is a vexed and difficult area.” The board admitted it had, in a very limited number of cases, paid out to pupils, but said to institute such arrangements would be dangerous.

“These new powers, if adopted, would have far-reaching and, indeed, unintended consequences, not least the crippling burden on awarding organisations of, say, having to meet 20 claims of pound;50,000,” it said.

Teachers might welcome more pressure on boards to ensure accurate grading. But awarding bodies could respond by increasing exam fees, which already cost secondaries more than they spend on books.

AQA wants to discuss the proposals with the Government. Questions raised in its submission included whether, if one student were compensated, others in similar circumstances would also be entitled to receive a payout.

Plans for Ofqual were announced last year as part of a move to address criticism of the independence of the current regulator, the Qualifications and Curriculum Authority (QCA). It is being split into two bodies: Ofqual, and an agency for qualification and curriculum development.

Isabel Nisbet, the QCA official who will be Ofqual’s acting head, has launched an inquiry into teachers’ complaints about grading.

The OCR board and Cambridge Assessment, which runs OCR, both take issue with the new regulators.

They argue that, with the Government still involved in overseeing the design of public exams, ministers will still be able to take decisions that will affect pass marks, such as the availability of re-sits.

OCR said continual changes to exams made it harder to show standards had been maintained.