Publicly Funded Passenger
Transport Services in Finland

10

Discussion Paper 2015• 10
Jari Kauppila

International Transport Forum,
Paris, FrancePublicly funded passenger transport
services in Finland

Discussion Paper No. 2015-10

Jari KAUPPILAInternational Transport Forum, Paris

March 2015

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PUBLICLY FUNDED PASSENGER TRANSPORT SERVICES IN FINLAND

Table of contents

Overview of public transport market in Finland ............................................................................................. 5
Legislation for taxi and bus services ............................................................................................................... 7
Publicly funded passenger transport services .................................................................................................. 8
Government funded scheduled public transport and fair subsidies ............................................................. 9
Government purchase or reimbursement of school transport and travel for health care ........................... 10
Municipal funded scheduled public transport and fair subsidies ............................................................... 10
Municipal purchase or reimbursement of school transport........................................................................ 11
Summary ....................................................................................................................................................... 12
References ..................................................................................................................................................... 13

Jari Kauppila — Discussion Paper 2015-10 — © OECD/ITF 2015

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PUBLICLY FUNDED PASSENGER TRANSPORT SERVICES IN FINLAND

Overview of public transport market in Finland

The share of bus transport of total passenger transport (as a percentage of total inland passengerkilometres) is slightly above EU average in Finland. Buses account for around 10% of total passenger
transport, compared with the EU average of 9% in 2011. The share of rail in total passenger transport,
in turn, was 5% in 2011, below the EU average of 7%.
Over 590 million passengers used public transport services in Finland in 2011. Buses carriednearly 60% of total number of passengers. However, in passenger-kilometres buses accounted for 41%of the total 11718 million passenger-km, while railways accounted for 34%.
Figure 1. Bus transport share of total passenger transport in selected countries, 2011
Percentage of passenger-km

45

40
35
30

25
20
15

10
5
0

Source: ITF/OECD; Eurostat.

Jari Kauppila — Discussion Paper 2015-10 — © OECD/ITF 2015

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PUBLICLY FUNDED PASSENGER TRANSPORT SERVICES IN FINLAND

Figure 2. Rail transport share of total passenger transport in selected countries, 2011
Percentage of passenger-km

35
30
25
20
15
10
5
0

Source: ITF/OECD; Eurostat.

Figure 3. Market share of public transport in Finland in 2011

Air
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Taxi
10%

Bus

Metro

Tram

Railway
11%
9%

59%

41%
3%

10%
9%

34%

12%
Passengers

Passenger-kilometres

Source: Finnish Transport Agency, 2013.

Turnover of companies providing public transport services in Finland was 2 932 million Euros in2011 (Finnish Transport Agency, 2013). Bus transport companies and taxis accounted for the largest
share, 1 196 and 1019 million Euros, respectively. Of the total turnover, 523 million Euros (18%)
came from public transport services in major cities.
The following table presents the turnover of public transport industry by type of transport together
with subsidies. Direct funding refers to purchases of transport by central and local government, statesubsidies and the net amounts of deficit compensation for major cities. Reimbursement of transport
expenses include compensation to and discounted tickets for special groups. Total general government
subsidies for purchases of public transport accounted for nearly one billion Euros in 2011, resulting inover 33% share of the sector’s turnover. General government spending share of turnover was highest
for taxi transport (41%) followed by bus transport (40%) and rail (19%). The subsidy rate, calculated

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Jari Kauppila — Discussion Paper 2015-10 — © OECD/ITF 2015

PUBLICLY FUNDED PASSENGER TRANSPORT SERVICES IN FINLAND

as the share of direct funding per turnover, was 12.6%. In comparison, in the United Kingdom, around
20% of operating revenues for local bus services come from public funding (DfT, 2011).
Table 1. Turnover and subsidies for public transport in 2011
Million Euros
TurnoverDirectfunding

Central government
Reimburs
ement
Total

Railway total

421

45.6

5.1

50.8

Long-distanceHelsinkiregional

320

34.7

3.6

38.3

52

0.9

Other Helsinki

49

10.1

Tram, metro

75

2.2

Bus total

0.9
1.5

Directfunding

Local government
Reimburs
ement
Total

26.2

3.8

Total general government
DirectReimburse
funding
ment
Total

30.1

Subsidy
rate

71.9

9

80.8

19.2%

17.1%

34.7

3.6

38.3

12.0%

10.8%

27.1

1.8

28.9

55.6%

52.1%

28.0%

20.6%

26.2

1.8
2

2

10.1

3.5

13.7

2.2

-12.5

4.8

-7.7

-10.3

4.8

-5.5

11.6

28

Share ofturnover

1196

48.7

39.4

88

255.4

133.9

389.3

304

173.3

477.3

39.9%

25.4%

Major cities

347

5.9

0.2

6.1

165.8

9.2

175

171.7

9.4

181.1

52.2%

49.5%

Charter

192

4.4

1.8

6.3

55.2

55.2

4.4

57.1

61.5

32.0%

2.3%

Other bus

656

38.3

37.3

75.6

69.5

159.1

127.9

106.8

234.7

35.8%

19.5%

Long-distance

85

5.6

5.6

123.5

5.6

5.6

6.6%

Other route

89.6

571

38.3

31.7

70

Taxi transport

1019

2.9

160.9

163.8

89.6

Air transport

221

1.2

0.5

1.7

1.1

TOTAL

2932

100.6

205.9

306.5

270.2

69.5

159.1

127.9

101.2

229.1

40.1%

22.4%

253.8

253.8

2.9

414.8

417.7

41.0%

0.3%

1.1

2.3

0.5

2.8

1.3%

1.0%

666.6

370.8

602.3

973.1

33.2%

12.6%

396.4

Source: Finnish Transport Agency, 2013.

Legislation for taxi and bus services

The Finnish Ministry of Transport and Communications prepares legislation regarding bus andcoach transport as well as taxis. Bus transport in Finland is organised under the provisions of Public
Transport Act (PTA), which is based on the Public Service Obligation (PSO) regulation of theEuropean Union. The provision of professional passenger transport services in exchange for a payment
is subject to a licence. The licence system is built on two licences: the basic licence is required in all
kinds of public transport and entitles to operate general government purchased transport and private
charter transport. For market-based transport and market-based demand-responsive transport there isalso another licence required in addition to the basic licence.
Public bus transport can be organized either as a market-based system (no public financing) or
procured according to the processes regulated by the PSO. The EU regulation on public service
obligations establishes how public authorities may intervene in the market to guarantee the quantityand quality of public transport services. When authorities conclude contracts on the public
procurement of public transport services, the provisions of the regulation and other legislation on
public procurement must be observed.
Providing demand-responsive public transport services is also subject to a licence. The applicant
must have a licence to operate public transport services and commit in providing services for aminimum of one year.

Jari Kauppila — Discussion Paper 2015-10 — © OECD/ITF 2015

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PUBLICLY FUNDED PASSENGER TRANSPORT SERVICES IN FINLAND

In case of market-based charter transport with minibuses (capacity with max 16 persons), the PTA
requires minimum five passengers per ride (source, Ministry of Transport and Communications).
Provisions on taxi services are laid down in the Taxi Act. The purpose of the Act is to ensure highquality taxi transport services throughout Finland. The maximum prices charged from customers fortaxi services are established annually by government decree. Under the Taxi Act, the professionaltransport of people in passenger cars on public roads is subject to a licence granted by the local Centre
for Economic Development, Transport and the Environment (so called ELY centre).
The owner of the taxi licence is obliged to provide taxi services primarily in the municipality forwhich the licence is granted. The ELY Centres confirm the maximum number of taxi licences permunicipality on an annual basis (10 000 licences nationwide). The criteria for obtaining a licence arelaid down in the Taxi Act. Examples of the criteria include that licence holders must have theprofessional skills necessary to provide taxi services and be able to meet their financial obligations.
In order to obtain a taxi driver's licence, applicants must complete compulsory training. The
training requirements focus on traffic safety and the communication skills needed in customer service.
The Act on the professional competence of taxi drivers entered into force at the beginning of 2010.
New taxi drivers applying for a licence are required to have completed at least 30 hours of training. In
addition, they must demonstrate their knowledge of the local environment to the organiser of the
training. The taxi driver's licence is valid for five years at a time. To renew his/her licence, a taxi
driver must take part in further training lasting at least one day.

Publicly funded passenger transport services

There is no legal obligation to organise scheduled public transport services in Finland, except forschool transport and certain travel for social welfare related purposes. Still, government as well as
most regions and municipalities invest in providing these services as they are considered importantpart of the economic attractiveness and liveability of regions. A number of different authorities
manage the administration, procurement and planning of a range of passenger transport services.
Publicly funded passenger transport services can be divided into two main categories:
1. Scheduled public transport (purchase of transport services and tariff subsidies); and2. Purchase or reimbursement of school transport and travel for health care (paratransit).
In 2011, the total cost of publicly funded transport services amounted to 973 million Euros in
Finland. This accounted for 33% the total public transport industry turnover. Direct purchase of public
transport services accounted for around 370 million Euros or 13% of total public transport turnover.
Figures 4 and 5 present total funding of public transport by source of funding and by mode. Over 60%
of funding is directed to municipal or government funding of direct purchase of transport services.
Municipal purchases of transport services for school transport and travel for health care amount for thelargest share, totalling nearly 400 million Euros (41% of total). By mode, buses account for half of
public funding while taxes account for 43% (MINTC, 2013b).

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Jari Kauppila — Discussion Paper 2015-10 — © OECD/ITF 2015

PUBLICLY FUNDED PASSENGER TRANSPORT SERVICES IN FINLAND

Figure 4. Total funding of public transport by source of funding
In Million 2011 Euros

Government funded scheduled public transport
Government funded paratransit

Municicpal funded scheduled public transport
Municipal funded paratransit

1200
1000
101

800
600
400
200
0

100

91

158

95
152

165

127

107

113

215

227

1997

1999

90

94

182

183

89

256

201

173

98
270

206

119

120

143

235

288

317

338

374

399

2001

2003

2005

2007

2009

2011

Source: MINTC, 2013b.

Figure 5. Total funding of public transport by mode
In Million 2011 Euros

Other

Rail

Taxi

Bus

1200
1000

77
73

800
600
400

200
0

82

72

249

279

67
364

419

82

77

77

195

218

230
290

339

355

379

480

281

443

274

1997

1999

2001

2003

2005

2007

2009

2011

315

Source: MINTC, 2013b.

A more detailed description of general government direct funding and reimbursement is presented
in the following for each type of service.
Government funded scheduled public transport and fair subsidies
Government funded scheduled public transport amounted 111 million Euros in the 2013
Government budget. Majority of the costs are related to the purchase of long distance train services forareas where market based services are not available (33.6 ME) and purchase of bus and taxi transport
in rural areas, including subsidies for work travel (31.6 ME). In 2013, around 5.5 million passengers
benefited from the bus transport in rural areas purchased by the government. The government subsidy
is estimated at 4€ per bus passenger (Government Budget 2013).

Jari Kauppila — Discussion Paper 2015-10 — © OECD/ITF 2015

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PUBLICLY FUNDED PASSENGER TRANSPORT SERVICES IN FINLAND

Government also subsidises public transport provision in large and medium-size cities for 20
million Euros. This subsidy is aimed at increasing the service level and competitiveness of public
transport in cities.
Government purchase or reimbursement of school transport and travel for health care
Government reimbursements of travel costs for health care related travel are largely paid by the
Finnish Social Insurance Institution (KELA). The objective is to provide access to (the nearest) healthcare services regardless of place of residence. The subsidy is significant especially to people living inrural areas and for those over 60 years old. The customer is responsible for costs up to 14.25€ per trip
(or for an annual total of 242.25€) after which all costs will be reimbursed. These reimbursements
amounted 294 million Euros corresponding to 5.3 million trips in 2013. Of the total trips, 60% weretaken by taxi and 20% by own car. The cost per trip is slightly higher for taxis (53€/trip) than for
private cars (48€/trip).
Table 2. Government reimbursement of travel costs for health care in 2013
Million Euros
Costs

Trips

Cost/trip

Taxi
Ambulance

169
93

3.2
0.6

53
155

Own car
Other
Total

13
19
294

1.1
0.4
5.3

12
48

Source: Giss (2014)

Most of the health care districts have created a direct reimbursement system which allows also for
combining trips. In this model, each health care district has a booking system that forwards the request
to the nearest available taxi. All passengers travelling at the same time to the same direction will be
combined in the same order. The total travel time should not become longer than double the original
travel time due to combination of trips (and should not exceed 2 hours). The waiting time is maximum
one hour. KELA has estimated that combining trips has already provided annual savings of 8 million
Euros.
The Finnish Social Insurance Institution reimburses also school transport for upper secondary
schools. This subsidy is eligible for trips over 10 kilometres long for daily school travel (minimum 4
days a week). These subsidies amounted to 48 million Euros in 2012 of which most (69%) were
reimbursements of travel by bus (€33 million) while most of the remaining subsidies were for students
using their own car for school trips. According to current legislation, the student is responsible forcosts up to 43 euros per month while the subsidy covers the remaining costs. Number of students
receiving the subsidy has remained constant at around 50 000 since late 1990s. However, costs perpassenger have increased significantly, from around 530 euros/student in 1998 to 865 euros /student in2012.
Municipal funded scheduled public transport and fair subsidies
Municipalities subsidy local public transport with varying degree. Direct funding of scheduled
public transport by municipalities amounted 270 million Euros in 2011. Of this, main part (155 million
Euros) includes public transport provision in Helsinki metropolitan area. Purchase of scheduled public
transport in small cities totalled 85 million Euros.

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Jari Kauppila — Discussion Paper 2015-10 — © OECD/ITF 2015

PUBLICLY FUNDED PASSENGER TRANSPORT SERVICES IN FINLAND

Municipal purchase or reimbursement of school transport
School transport for elementary and secondary school accounts for the largest share of municipal
travel costs, amounting to 160 million Euros in 2011. These include tickets for scheduled bus services
as well as bus and taxi services purchased separately by municipalities. The provision of schooltransport is laid down in a law according to which it is the obligation of the municipality to organize
school transport for all students whose trip is more than five kilometres.
The number of students eligible for school transport has remained relatively constant at around
23% of total over the years. However, costs per students have increased from 953 euros per student in2005 to 1426 euros in 2012. Other municipal obligations include the responsibility for organisingtransport services for those with limited access due to illness or handicap. These transport services
amounted at 112 million Euros in 2011. In addition to those set by legislation, municipalities
organised other discretionary transport services for other social welfare purpose amounting 28 million
Euros (MINTC, 2013b).
Figure 6. Number of students and total costs
Euros (constant 2012 values)

175

130000170125000165160120000155115000150

110000145140105000100000

Milion Euros

Costs

Number of students

Number of students

135
2005

2006

2007

2008

2009

2010

2011

2012

130

Source: Karvonen & Siltala, 2014.

Jari Kauppila — Discussion Paper 2015-10 — © OECD/ITF 2015

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PUBLICLY FUNDED PASSENGER TRANSPORT SERVICES IN FINLAND

Figure 7. Cost per student
Euros (constant 2012 values)

1600
1400
1200

1000
800
600
400
200
0

2005

2006

2007

2008

2009

2010

2011

2012

Source: Karvonen & Siltala, 2014.

Summary

In Finland, passenger transport services funded from public resources are not the responsibility ofa single authority. Instead, a number of different authorities manage the administration, procurement
and planning of a range of passenger transport services. In 2012, the Ministry of Transport andCommunications appointed a rapporteur to examine whether publicly funded passenger transport
services could be combined. The report concluded that there is a considerable savings potential,
especially with more efficient procurement and planning of transport services (MINTC, 2013a).
Reimbursement are estimated to total EUR 900 million by 2030, instead of projected EUR 1.4 billion
through concentration of the administration and financing of passenger services for one authority,
taking more advantage of the combination of different kinds of trips and encouraging passengers andauthorities to organise their trips in a more efficient way.
Despite efforts to maintain high level of services, accessibility is becoming an issue in rural areas
and especially people with limited access have seen their service levels reduced in Finland. At thesame time, the cost of publicly funded passenger transport services is estimated to increasing around
10% per year. Several factors have been identified for this cost increase, including:12General cost increase in producing transport services;

Growth in purchase of statutory travel services (provided often by taxi) in rural areas andeven in cities as a result of a decline in market based service levels, combined with reduced
public funds for public transport;

Cooperation for procurement of transport services within and between municipalities andregional authorities not optimal;

Jari Kauppila — Discussion Paper 2015-10 — © OECD/ITF 2015

PUBLICLY FUNDED PASSENGER TRANSPORT SERVICES IN FINLAND

Transport services are not being planned as a whole but each administration works on its
own silo;Goods, people and services are moving separately;Procurement of taxi services not working very well as authorities lack knowledge;

Taxi licenses are based on quotas and prices are controlled while often only one taxi operator
per region resulting with little competition;

Increase in costs related to school transport as a result of closing down of several schools inrural areas, resulting in longer distance for school travel; andAgeing of the society and simultaneous reduction of services for elderly in rural areas,
resulting with increased distances for health care services.

References
Finnish Transport Agency (2013), Public Transport Performance Statistics 2011, Statistics of theFinnish Transport Agency, 3-2013, available at http://www2.liikennevirasto.fi/julkaisut/pdf3/lti_201303_public_transport_web.pdf
Giss (2014), Taksien suorakorvausmenettely, matkojen yhdistely, KELA, 13.1.2014, Power Point.
Government Budget (2013), available at
http://budjetti.vm.fi/indox/tae/frame_year.jsp?year=2013&lang=fi
Heikura (2014), Kelan taksikyytien suorakorvausmenettely, matkojen yhdistely Keski-Suomensairaanhoitopiirissä, 13.1.2014, Power Point.
Kuusisto (2014), Koulumatkatukea toisen asteen opiskelijoille, KELA, 13.1.2014, Power point.
Karvonen & Siltala (2014), Koululaisten kuljetuksista, Kuntaliitto, 18.2.2014, Power Point.
MINTC (2013a), Julkisesti tuettujen henkilökuljetusten rahoituksen ja toimintatapojen
kehittäminen, Liikenne- ja viestintäministeriön julkaisuja 11-2013.
MINTC (2013b), Joukkoliikenteen rahoitus, Työryhmän raportti, Liikenne- ja
viestintäministeriön julkaisuja 12-2013.

Jari Kauppila — Discussion Paper 2015-10 — © OECD/ITF 201513

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