The static dipole polarizabilities of water clusters (2<or=N<or=12) are determined at the coupled-cluster level of theory (CCSD). For the dipole polarizability of the water monomer it was determined that the role of the basis set is more important than that of electron correlation and that the basis set augmentation converges with two sets of diffuse functions. The CCSD results are used to benchmark a variety of density functionals while the performance of several families of basis sets (Dunning, Pople, and Sadlej) in producing accurate values for the polarizabilities was also examined. The Sadlej family of basis sets was found to produce accurate results when compared to the ones obtained with the much larger Dunning basis sets. It was furthermore determined that the PBE0 density functional with the aug-cc-pVDZ basis set produces overall remarkably accurate polarizabilities at a moderate computational cost.