Even before the onset of economic downturn in 2008-9, UK policy on employment, work and welfare had reached an impasse, with little evidence of new ideas, either in relation to the final years of New Labour or the Coalition Government, as to how to tackle deeply entrenched problems beyond adherence to neo-liberalism. This article explores whether a capabilities approach, as originally developed in the work of Amartya Sen and Martha Nussbaum, offers a potential framework for new thinking. It is argued that the capabilities approach is best thought of not as offering a detailed road map for policy, but as providing a critically different conceptualization of the purpose and principles of public policy. In seeking an alternative to neo-liberal hegemony a capabilities approach therefore can provide a framework for new thinking, and an underpinning ideological narrative from which policy development can flow.