A study in Belfast has concluded that a system called linguistic phonics helps children to make more progress with their reading skills.
This is just the latest development in a debate over phonics that has generated a lot of research in recent years. It's impossible to do justice to the various viewpoints in a short blog post such as this, so a good starting point would be to look at Phonics: The Debate, an excellent page on the National Literacy Trust website which contains links to relevant news stories, research reports and more.
If you do only examine one report on this subject, then take a look at A Systematic Review of the Research Literature on the Use of Phonics in the Teaching of Reading and Spelling, which was published by the DfES last year. The DfES also has a Phonics website, which contains information for schools on how to choose an effective programme.