We present a model for the diffuse interstellar dust that explains the observed wavelength-dependence of extinction, emission, and the linear and circular polarisation of light. The model is set up with a small number of parameters. It consists of a mixture of amorphous carbon and silicate grains with sizes from the molecular domain of 0.5 up to about 500 nm. Dust grains with radii larger than 6 nm are spheroids. Spheroidal dust particles have a factor 1.5-3 greater absorption cross section in the far-infrared than spherical grains of the same volume do. Mass estimates derived from submillimetre observations that ignore this effect are overestimated by the same amount. In the presence of a magnetic field, spheroids may be partly aligned and polarise light. We find that polarisation spectra help to determine the upper particle radius of the otherwise rather unconstrained dust size distribution. Stochastically heated small grains of graphite, silicates, and polycyclic aromatic hydrocarbons (PAHs) are included. We tabulate parameters for PAH emission bands in various environments. They show a trend with the hardness of the radiation field that can be explained by the ionisation state or hydrogenation coverage of the molecules. For each dust component its relative weight is specified so that absolute element abundances are not direct input parameters. The model is compared to the average properties of the Milky Way, which seem to represent dust in the solar neighbourhood. It is then applied to specific sight lines towards four particular stars, with one of them located in the reflection nebula NGC 2023. For these sight lines, we present ultra-high signal-to-noise linear and circular spectro-polarimetric observations obtained with FORS at the VLT. Using prolate rather than oblate grains gives a better fit to observed spectra; the axial ratio of the spheroids is typically two and aligned silicates are the dominant contributors to the polarisation.