A potential surface for deformable water molecules is constructed using an accurate local-mode intramolecular model together with a realistic semi-empirical intermolecular interaction. Locally stable structures for (H2O)n, n = 2, 3 and 4, are reported and their vibrational frequencies calculated using both normal-mode analysis with variational corrections for anharmonicities, and local-mode analysis. It is shown that experimentally observed changes in vibrational frequencies on cluster formation arise from anharmonic terms in the monomer potential that become significant due to distortions to the equilibrium geometry. Inhomogeneous line shapes are calculated using rigid-rotor theory, linear response theory, non-equilibrium molecular dynamics and a semi-classical method based on classical Monte Carlo trajectory propagation and local-mode spectral analysis. The last method gives a satisfactory description of the density of states in the intramolecular vibrational region of the spectrum. Dipole moment functions including polarisation give infrared intensities in good agreement with available experimental data.