A large group of Higher candidates had "little or no grasp of the basics", with 25 per cent gaining no award.
The report states that many candidates are being presented at the wrong level. About one in 12 gained 28 or fewer marks out of 140 in the written exam, and markers raised concerns that they were providing answers more befitting a Standard grade paper.
The standard of written English was "very varied", and there was frequent poor spelling of "basic terms".
One of the few areas in which candidates performed well was where questions required a shorter response.
Numbers continue to decline slightly, with entries down to 4,177 from 4,341 last year.
The bleak overall picture emerges despite 2007 being the third year in which revised arrangements for Higher computing have been in place. The report notes that the paper was "well received" by practitioners, candidates and the media. Performance at Advanced Higher improved compared to 2006, but entries were down from 450 to 349.