before the Act but now this totally changed, and from "midsummer 1871 [when the first Licensing Bill was discussed] till the dissolution of 1874 nearly every public-house in the United Kingdom was an active committee-room for the Conservative Party". Gladstone blamed the Act for the Conservative victory in the 1874 general election, writing: "We have been borne down in a torrent of gin and beer". The Supreme Court of Judicature Act 1873 remodelled the English court system (establishing the High Court of Justice and the Court of Appeal) and attempted to abolish the House of Lords as a judicial body for England, but this was not implemented due to the Conservative victory of 1874. As Gladstone's Secretary of State for War, Edward Cardwell enacted far-reaching reforms of the British Army in what would become known as the Cardwell Reforms. Finance In 1868 Gladstone appointed Robert Lowe (1811–92) Chancellor of the Exchequer, expecting him to hold down public spending. Public spending rose, and Gladstone pronounced Lowe "wretchedly deficient." Maloney notes that historians concur on that. Lowe systematically underestimated revenue, enabling him to resist the clamour for tax cuts, and to reduce the national debt instead. He insisted that the tax system be fair to all classes. By his own criterion of fairness—that the balance between direct and indirect taxation remain unchanged—he succeeded. Historians point out that this balance had never been a good measure of class incidence and was by that time thoroughly archaic. Public expenditure on the military and the navy by 1871 was at its lowest level since 1858. Overall, national public expenditure was reduced from £71,000,000 in 1868 to £67,000,000 in 1870 and 1871. However, it rose to £74,604,000 in 1874. Nevertheless, Gladstone was able to produce five surpluses for each year amounting to £17,000,000. He was also able (he resumed the office of Chancellor of the Exchequer in August 1873 till the dissolution of Parliament in early 1874) to reduce the income tax to 3 pence in the pound in 1873, and the next year proposed to abolish it altogether if he won the next general election. Foreign policy In the aftermath of the Franco-Prussian War of 1870–71 Gladstone attempted to persuade the German Chancellor Otto von Bismarck to forbear from annexing Alsace and Lorraine from defeated France. Gladstone published an anonymous article in the Edinburgh Review in October 1870 espousing his views, but it did not remain anonymous for long. The Germans remained unconvinced by Gladstone's overtures, however. France would regain both provinces in 1919 and 1944—but only after two World Wars with Germany. During the American Civil War the Confederate ship CSS Alabama had been built in an English port and had subsequently damaged Union shipping. In 1872 Gladstone settled the Alabama Claims by giving the United States $15,500,000 as part of the Treaty of Washington. Army reform Gladstone paid little attention to military affairs but in 1870 pushed through Parliament major changes in Army organisation. Germany's stunning triumph over France proved that the Prussian system of professional soldiers with up-to-date weapons was far superior to the traditional system of gentlemen-soldiers that Britain used. The reforms were designed to centralise the power of the War Office, abolish purchase of officers' commissions, and to create reserve forces stationed in Britain by establishing short terms of service for enlisted men. Edward Cardwell (1813–1886) as Secretary of State for War (1868–1874) designed the reforms that Gladstone supported in the name of efficiency and democracy. In 1868 he abolished flogging, raising the private soldier status to more like an honourable career. In 1870 Cardwell abolished "bounty money" for recruits,