Long story short, I started this course because I was told I could apply for funding during my first year which would cover the remainder of the PhD. This has since turned out to not be the case, and I’m now applying to other institutions for funded places with the aim of withdrawing from my current course if I’m successful in securing a place with funding elsewhere to start in September. My current supervisor not only endorses this but has told me she will give me a stellar reference, as she knew me during my masters. I didn’t think to mention I was currently registered on a PhD course to these new universities because it didn’t seem to be relevant. I’ve been able to do very little work because I’ve been working to support myself with no funding, and I’m not leaving because I’ve done anything wrong. A friend has since raised the question that it may be considered an issue to my potential universities, and that I should have disclosed it. I didn’t because as far as I’m concerned I’m only really technically enrolled on the course due to errors in advice and through no fault of my own need to leave. I don’t want to deceive but I also don’t want to be appear less desirable as a candidate for something beyond my control.
I'm not sure what your friend thinks you should disclose, but no, it doesn't look bad that you are taking care of yourself. You will, as you suggest, probably be more productive in a funded position for reasons that will be obvious to everyone.
If you fail to disclose that you are currently in a program then that might be an issue, but it is unrelated to funding. A new program will probably require transcripts from all of your educational activities, though you may not have been in the program long enough to have generated any.
Your current supervisor writing you a letter will probably make the situation clear and if you are asked, be honest.
People leave one program for another quite frequently for lots of reasons. Lack of funding is probably one of the best reasons.