PERHAPS IT is a good job that Channel 4 chief executive Andy Duncan decided to leave the word "digital" out of the title for the broadcaster's new mobile, online and gaming fund 4iP.

This is because the broadcaster - which is looking for £100 million in cuts over the next two years to fight off the economic downturn - has already been backtracking on its commitment to certain forms of digital media. Within the last few weeks it has axed long-awaited plans to expand into digital radio and launch 4DS, a specialised online advertising sales team.

But 4 Innovation For The Public - 4iP for short - a £50m war chest to fund ideas by "troublemakers" and "innovators" in the new media world, remains a key part of Channel 4's vision for the future.

Spending millions on a project that 4iP head Tom Loosemore admits has "nothing to do with television" may seem a strange decision for a broadcaster to take in a period of almost unprecedented belt-tightening, but there is a lot riding on the success of the fund.

Earlier this year, Channel 4 director of nations and regions Stuart Cosgrove used it to defend the broadcaster's financial commitment to Scotland to the Scottish Broadcasting Commission, trumpeting Scotland's leading role in the fund.

He was able to point out that Ewan McIntosh, 4iP's first appointed commissioner, will be based in Glasgow. This is one of Channel 4's key arguments in deflecting potential criticism that it is not doing enough to increase its Scottish spend. It currently only spends £9m - 2% of its programme budget - on network commissions in Scotland, and even its commitment to raise it to £14m, some 3%, by 2012 is far less than either the Scottish government would like or the BBC's pledge to raise its spend from 3% to 9% of network commissions by 2016.

Cosgrove responded that it was unfair to compare Channel 4 with the BBC because it has no internal production capabilities and was not able to move shows around the country. But he agreed that if TV regulator Ofcom could find a solution to the broadcaster's funding shortfall, it ought to aim far higher than the 3% pledge.

But the issues behind 4iP go deeper still. Strathclyde University professor of journalism Brian McNair says it needs to be viewed in the context of the current review of public sector broadcasting (PSB), in particular the role media regulator Ofcom is considering for Channel 4 in the future broadcasting make-up of the UK.

He says: "The future is not just in TV: we all know that now and Channel 4 is rebranding itself as a multi-platform network. What it is trying to do is show it is the commercial PSB of the future and it wants to get Ofcom onside. It is trying to show it is fully taking on the mantle of a PSB."

When Channel 4 was set up to promote independent television production in 1982 it provided funding and support to companies and received only programmes in return, taking no stake in the companies it helped create.

But 4iP will see the broadcaster taking equity stakes in promising new media start-ups, a potentially lucrative revenue source as the digital sector continues to grow. As well as McIntosh, there will be commissioners based in Birmingham and Yorkshire, who are being recruited now.

Across the UK, the broadcaster hopes to spend up to £50m but only £20m will be Channel 4 money, with the rest raised from partners such as regional development funds. According to Cosgrove, the fund will spend £8m in Scotland.

4iP head Loosemore suggests it represents no less than the second coming of Channel 4.

He says: "It is going back to 1982 and going round the country asking people who have not had the opportunity to contribute to the media to make a difference.

"We are going to be taking risks and we are going to make mistakes, because, for the public good, we are taking chances that others won't."

This will be seen as bullish for a relatively small investment. The planned Scottish spend might be a reasonable pot of money, but Channel 4's £20m 4iP spend is only around its annual budget for digital channel More 4. And although the total pot might be larger, that money is not guaranteed to be spent.

McIntosh, nevertheless, says the aim is to help "hundreds" of Scottish companies - from students with a good idea to larger media and technology companies. He is reluctant to pin down exactly what he wants, for the fear of narrowing proposals, but he talks proudly of websites such as Slugger O'Toole, a blog that has changed the way politics is reported in Northern Ireland.

Yet should Channel 4 be spending as much as £20m on a project with such vague parameters?

"At one stage the BBC was a radio company going into TV. This is about the future," counters McIntosh.

Emily Bell, director of digital content for Guardian news and media, who set up Guardian.co.uk in 2001, welcomes Channel 4's move but fears the credit crunch may have damaged its chances for success.

She believes the broadcaster will now only be able to commit less than £10m of its own money to the project and doubts it will be able to attract enough extra funding from its partners to make up the remaining £40m.

She says: "We all know the next wave of PSB is not going to be around the broadcasting industry, it's going to be online.

"Channel 4 should be applauded but ... creating broadband content isn't going to be very high on anyone's list of priorities just now. They might find themselves on the wrong side of the financial crisis."

Cosgrove hit back that Bell was "simply wrong". He said: "We have reduced the back office headcount at 4IP, but the actual core budget remains the same."

If it keeps to its spending plans, 4iPcould clearly keep Channel 4 relevant and solvent for generations to come. Whether it will be enough to satisfy the Scots that they are getting enough out of the UK's alternative public broadcaster is another question. Channel 4 will have to hope that from out of the "hundreds" of Scottish companies it promises to fund, it will produce a few big enough winners to keep the naysayers at bay.