England is just introducing a phonics screening test for all children at ?6 ?7 I forget, and it involves reading nonsense words (presented as being the names of aliens, IIRR, to persuade children not to give the closest real word instead of decoding them phonetically). This has been criticised in the popular press, but yes, my understanding is that it's an effective way to test phonic understanding, and thus identify children who might currently be able to read adequately for their age because they've memorised a lot of sight words, but who will struggle later.
And yes, a good phonics programme is what's needed - but also, you need to be prepared for it maybe not to work easily, because if a bright child hasn't worked out phonics on their own by the time they can read pretty well, it is possible that it may be a sign of dyslexia.
