This article examines the policy detail of welfare state reform agendas in two countries in which self-proclaimed ‘Third Way’ governments have been in power – Germany and the United Kingdom – in order to explore the competing influences on social policy of an ostensibly common set of ideas and contrasting institutionalised policy legacies. In so doing, it assesses the analytic utility of Bevir and Rhodes’ ideationally rooted interpretive approach against institutionally rooted claims of path dependency. It concludes that while the interpretive approach rightly stresses the need for a stronger focus on ideas as an explanation for policy change, the detail of actual Third Way policy reforms can only be understood from within the two nations’ institutionalised policy legacies. In addition, it argues that policy networks have had a considerable influence on reform trajectories too. The article advocates a closer synthesis of perspectives centred around ideas, interests and institutions in order to further our understanding of processes of policy change.