A company that profits from the privatisation of public services has been awarded a £5 million government grant to set up a base in Scotland.

Serco Ltd, which has a turnover of more than £2.5 billion, has been lined up for the cash weeks after landing a multi-million pound contract to run IT services in Glasgow.

A spokesman for Unison, a trade union which represents local government workers, said he had "concerns" about private firms being allowed to make windfalls from frontline services.

The Scottish government last week published its latest round of grants to firms through the Regional Selective Assistance (RSA) scheme, which provides financial help to companies willing to locate in deprived areas.

The list showed Serco, an "international service" company, has been awarded a £5.1m grant to create 650 new jobs in Glasgow.

The firm, which according to its website made a pre-tax profit of £123m in 2007, will use the assistance to boost employment in the software, technology and outsourcing sectors.

However, the grant has raised eyebrows as Serco is a key beneficiary of government policy to privatise key parts of the public sector.

The firm already provides out-of-hours GP services in Cornwall, runs education services in Walsall and is also in charge of an immigration removal facility south of the Border.

In Scotland, Serco is responsible for running the much-maligned private prison in Kilmarnock, as well as handling the electronic monitoring of offenders across the country.

It also made a bid to run a GP practice in Harthill, Lanarkshire, but lost out after criticism was voiced about the prospect of a private company taking over the service.

Linked to the £5m handout was the joint venture Serco entered into earlier this year with Glasgow City Council.

The company and the local authority signed a 10-year outsourcing deal that hands day-to-day control of large chunks of the council's land, IT and property services to the firm.

Around 280 council staff have been transferred to the new limited liability partnership (LLP), an arrangement the council says will save taxpayers' money.

The grant will help Serco set up a base in Scotland and allow it to pitch for other contracts in the public sector.

A spokesman for Unison said: "This grant is no surprise. When Serco was making its pitch for the Glasgow IT and property contract it indicated it was bidding for a grant to establish a base in Scotland to allow it to grow its business and grow jobs in Glasgow.

"Unison has had well-publicised concerns that the expansion of e-government and the pressure for shared service solutions can be used by private sector firms as a way to increase their involvement in, and profit from, our public services. This direction by the company seems to confirm it."

A Scottish government spokesman said: "This grant will help create 650 welcome new jobs in Glasgow - a massive boost for the local and wider economy. "In the absence of full economic powers, RSA is a grant scheme that complements the Scottish government's drive to create the more competitive business environment this country needs."

A spokesman for Serco said: "This grant allows for the creation of jobs in Scotland that would otherwise be placed elsewhere in the UK or overseas."