A defiant Wendy Alexander insisted last night that she intended to hang on as the head of Labour in Scotland despite being reported to the prosecuting authorities for not registering donations to her leadership campaign.

Ms Alexander, a close friend and ally of the Prime Minister and the sister of Douglas Alexander, the International Development Secretary, maintained that she was “getting on with the job” and that she was determined to prove her innocence.

She was buoyed by robust declarations of support from her Labour group of MSPs at Holyrood and from other key figures in the Scottish party, some of whom hinted that they believe the standards watchdog who has referred her case to prosecutors is guilty of a “stitch-up”.

Neither, it appeared last night, is there any appetite from the direction of Downing Street for her to fall on her sword. Sources close to Gordon Brown said that, while the Prime Minister was anxious that the controversy showed no sign of dying down, Ms Alexander had to be given a chance. “She has to have the opportunity to get through this and get the focus in Scotland back on policy,” one source said.

However, some of her backbench MSPs also admitted that she had to stay in post because there is no obvious candidate to succeed her. Ms Alexander insisted that she had no intention of following the precedent set by Peter Hain, who resigned ten days ago as Work and Pensions Secretary after the Electoral Commission referred donations to his UK deputy leadership campaign to the police.

The latest episode in the donations furore that has engulfed Ms Alexander since she became Scottish leader unopposed less than five months ago, came when it was confirmed that Jim Dyer, the Standards Commissioner at the Scottish Parliament, had reported her to the procurator fiscal.

He had concluded that there was evidence she had broken the rules on declaring gifts by not registering ten leadership campaign donations of more than £520 in the MSPs’ register of interests at Holyrood.

The latest twist came two days after Ms Alexander issued a surprise statement on Friday saying that she had been advised last November by Parliament officials that she did not need to register the donations, but that Dr Dyer had now overturned that decision and she had immediately complied with his verdict.

It appears that Dr Dyer, after taking legal advice, has now decided on his course of action because he is obliged to do so as a result of a memorandum of agreement between himself as standards watchdog and the Crown Office, the prosecuting authority in Scotland.

His basis for doing so, it appears, is that her conduct in not registering the donations, if proved, could constitute a criminal offence. It is now up to the fiscal to decide whether Ms Alexander should be prosecuted.

Ms Alexander is also still awaiting the verdict of the Electoral Commission, which has been running a parallel inquiry into whether she should be referred to the prosecuting authorities for accepting a £950 donation, admitted by campaign colleagues to have been illegal, from a Jersey-based businessman who is not on the UK electoral register.

The outcome of the Commission’s inquiry is expected this week and Ms Alexander’s defence is that there was no “intentional wrongdoing” on her part.

Yesterday Ms Alexander appeared calm in the face of the latest blow and said that the party would be ill-served if she was to quit because of a “distraction”. She added: “I am clear that suggestions that I have been guilty of trying to subvert the law in the registration of donations are unfounded. I will not stand down for having followed the parliamentary authorities’ guidance.”

Michael McMahon, Labour’s chief whip at Holyrood, said: “Surely, the question is why she was given the wrong advice in the first place. We need to get her through this and we will emerge stronger.”

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