In his statement to the House of Commons on Thursday, he also warned that the resurgence of coronavirus poses a threat to the UK’s “fragile” economic recovery.
In order "to continue protecting jobs", the Chancellor outlined his "winter economy plan". Here are five key points from Mr Sunak's announcement.
The Chancellor said this new scheme is aimed at protecting “viable” roles, rather than all posts which have been kept going as a result of state support under the furlough programme.
Under the terms of the new scheme, the Government will top up the wages of people working at least a third of their normal hours.
They will be paid for that work as normal, with the state and employers then increasing those wages to cover two-thirds of the pay they have lost by working reduced hours.
ITV News' Political Correspondent Paul Brand said the new system will pay out far less than the furlough scheme
The Chancellor said it is “fundamentally wrong” to hold people in jobs that only exist inside the furlough scheme.
He told the Commons: “The furlough was the right policy at the time we introduced it, it provided immediate short-term protection for millions of jobs through a period of acute crisis.
“But as the economy re-opens it is fundamentally wrong to hold people in jobs that only exist inside the furlough.”
The new scheme will cost "billions a month", ITV News Political Editor Robert Peston says.
2. The self-employed grant will be extended on similar terms as the job support scheme
Mr Sunak said the Government will continue to provide support for the self-employed.
He added: "This is something virtually no other country in the world has done and it comes on top of the most generous support to our self-employed out of almost any country throughout their response to this crisis.”
3. A “pay as you grow” scheme will allow firms to repay "bounce back loans" over a period of up to 10 years
Rishi Sunak said "bounce back loans" have given more than one million small businesses a £38 billion boost to survive, adding a “pay as you grow” scheme would be introduced to give these firms 10 years rather than six years to repay the money.
This move will slash monthly repayments by almost half, according to the Chancellor.
He told the Commons: “Businesses who are struggling can now choose to make interest-only payments and anyone in real trouble can apply to suspend repayments all together for up to six months.
“No business taking up 'pay as you grow' will see their credit rating affected as a result.”
4. VAT will be kept at 5% for hospitality and tourism until March 31, 2021
Mr Sunak announced that the temporary reduction of VAT rates for the hospitality and tourism sectors will be extended for a further two months. The new deadline will be March 31 2021.
He said: “On current plans, their VAT rates will increase from 5% back to the standard rate of 20% on January 13.
“So to support more than 150,000 businesses and help protect 2.4 million jobs through the winter, I’m announcing today that we are cancelling the planned increase and will keep the lower 5% VAT rate until March 31 next year.”
5. The resurgence of coronavirus poses a threat to the “fragile economic recovery”
Alongside his package of measures, the Chancellor acknowledged that the recent spike in coronavirus cases means the economy could struggle to bounce back.
He added “we can’t save every business” and “we can’t save every job”.