The Labour party is running out of money. It always appears to be running out of cash, only this time it is even more broke than usual. Engulfed in crises, the Co-op threatens to slash funding. Separately, Labour risks losing millions from the unions. The other parties laugh cautiously, acutely aware that when it comes to party funding, celebratory laughter at their opponents' expense can turn very quickly to tears.

There have been so many tearful episodes for all of them. The only time Labour was less dependent on union money was when Tony Blair attracted an army of private donors. Like a lot of Blair's initiatives aimed at showing that Labour had learned the lessons of the past, this one ended up landing him and his party in even deeper trouble as the absurd "Yates of the Yard" conducted his dark "cash for honours" inquiry. Whatever the route, a party's hunt for cash always ends badly.

While Nick Clegg has sought to stir things in relation to the Co-op and Labour, he has not tried very hard. Last week on his LBC phone-in, he had to acknowledge that his party, too, has had funding issues. He can say that again, with the Lib Dems having taken millions from a single dodgy donor. The Conservatives need to be careful how they play this card too. They were perceived increasingly as the "nasty party" partly because of the weird or crooked Tory donors who surfaced in the 1990s. Labour made much of it at the time and will do so again.

The focus is now on Labour. As part of their onslaught, some Tory MPs are demanding Ed Balls repay the £50,000 donation he has received from the Co-op group. Balls and his small office seek to oppose George Osborne, who as chancellor has the resources of the Treasury behind him. No doubt the Co-op's £50,000 was gobbled up long ago. Opposition parties are helped a bit with the so-called Short money – public cash to fund their activities – but in the 24/7 modern political era it is not enough. I received an email from a special adviser to a shadow cabinet member at 10pm on Friday and got the impression he never stopped. Politics is hard work and has to be paid for.

Labour faces its latest cash crisis at the most demanding point of the electoral cycle. Last summer, when he was in a weaker position than he is now, Ed Miliband responded clumsily to the murky saga about Labour's selection of a candidate in Falkirk, alienating his party's biggest donors without making the selection of candidates any more democratic. On some fronts the Tories' strategist Lynton Crosby might be mistakenly turning David Cameron into an even more rightwing leader, but in pushing stories that lead to the near bankruptcy of his opponents he plays a blinder.

Nonetheless, like most of Labour's cash crises I suspect this one will be partly postponed. I am told Miliband is fairly confident he will find the necessary cash for the next election. If he wins, he is likely to introduce state funding as part of his first Queen's speech when a new government is on a honeymoon. On this thorny policy area he has an ally in Clegg if there were to be a Lib-Lab coalition. But if Labour loses, the party faces a funding crisis of near terminal proportions.

There is a much bigger issue than the immediate funding of one party. We need parties. The alternative is nightmarish. The leaders' pathetic search for cash to pay for their parties fuels the anti-politics mood and yet they need the money. Virtually every dark story in British politics over the last 30 years has a connection with the funding of politics, but without funding parties cannot function.

During John Major's recent much-publicised speech on domestic politics, he put the case for state funding of parties. His views on this deserve as much of an airing as those he expressed in relation to the energy companies. The outrage that would greet such a reform would soon pass. The era when, fairly or not, parties are linked with fraudsters, union barons, fat cats wanting a peerage and Methodist ministers high on cocaine has continued for a dangerously long time.