I am currently applying for PhD's and have had a reply from a supervisor saying that there may be some studentships that could be applied for with me as
a 'named applicant' - what does this mean? is it to do with funding?

Yes - it is to do with funding. Most studentships in the UK are allocated to an academic, who then chooses which student to appoint. However in some cases, particularly in the arts and humanities, the academic must present both, a good research project and an exceptional student to carry it out, to the funding body, before they can receive funding.

Such a system should allow you far more input into defining the aims and scope of your research project.